Designing a company-specific Production System

Designing a company-specific Production System:

Developing an appropriate operating approach

DENNIS KALLIN JOHAN MEINHARDT

Master of Science Thesis

Stockholm, Sweden 2013

Designing a company-specific Production System:

Developing an appropriate operating approach

Dennis Kallin Johan Meinhardt

Master of Science Thesis INDEK 2013:77

KTH Industrial Engineering and Management

Industrial Management

SE-100 44 STOCKHOLM

Master of Science Thesis INDEK 2013:77

Designing a company-specific production system: Developing an appropriate operating

approach

Dennis Kallin

Johan Meinhardt

Approved

2013-06-11

Examiner

Mats Engwall

Supervisor

Jannis Angelis

Commissioner

Anonymous

Contact person

Anonymous

Abstracts

To boost operational performance and ultimately competitiveness, firms choose to develop

company-specific Production Systems (XPS). Developing such production systems the

management literature suggests that a XPS must be tailored to the firm operating context to yield

full effect. This explorative case study examines how to design a XPS that provides an

appropriate operating approach. Clarifying terminological confusion, the study proposes a XPS

framework derived from the literature that encompasses three levels of operating elements -

philosophical, principle, and practice. Investigating how to prioritize among these elements the

study empirically validate the importance of tailoring firm operating approaches. In particular,

categorizing practices as technical or socio-technical, and internal or external, the study

contradicts existing research and posit that (1) socio-technical practices are a prerequisite for the

adoption of technical practices and (2), practice classified as internal also have an external

dimension. In addition, the results indicate that a XPS must evolve as contextual requirements

and prerequisites change – thus making the design of a XPS dynamic. Finally, this study

proposes a case-specific production system, tailored to the requirements of the research objects

market-, organizational- and process context.

Key-words: Production System, Lean, Continuous Improvement, Operating system

DESIGNING A COMPANY-SPECIFIC PRODUCTION SYSTEM D. Kallin and J. Meinhardt

1 I

TABLE OF CONTENT

CHAPTER 1

1 Introduction 4

1.1 Background 5

1.2 Problem definition 6

1.3 Research objectives 7

1.4 Research questions 7

1.5 Delimitations 8

1.6 Abbreviations and acronyms 8

CHAPTER 2 9

2 Method 9

2.1 Developing the theoretical framework 10

2.2 Case study 10

Interviews 11 2.2.1

Focus groups 14 2.2.2

Observations 14 2.2.3

Internal documents 15 2.2.4

2.3 Cases study governance 15

Steer Group and Project Group governance 15 2.3.1

Workshop 16 2.3.2

2.4 Validity and reliability 16

CHAPTER 3 18

3 Theory 18

3.1 Facilitating long term improvements 18

Operating principles – a review of the terminology 19 3.1.1

3.2 The common foundation of XPSs 20

Understanding the XPS foundation 22 3.2.1

3.3 Implications when tailoring a XPS 25

The importance of having a direction 26 3.3.1

Implications when prioritizing amongst practices 26 3.3.2

Work force aspects – generating commitment 32 3.3.3

3.4 A supporting framework – dimensions to consider when designing a XPS 35

CHAPTER 4 37

4 Results and discussion 37

4.1 Market Context 38

Current state 39 4.1.1

Market requirements for an appropriate operating approach 43 4.1.2

4.2 Organizational Context 44



2 II

Organisational requirements for an appropriate operating approach 52 4.2.2

4.3 Service delivery 52


Process requirements for an appropriate operating approach 56 4.3.2

4.4 Proposed XPS at the FSO 57

The vision 57 4.4.1

The Principles 57 4.4.2

The Practices 59 4.4.3

CHAPTER 5 66

5 Conclusion 66

5.1 Research findings 66

5.2 Conceptual contribution 68

5.3 Empirical contribution 69

5.4 Limitations and further research 70

CHAPTER 6 72

6 References 72


3 III

LIST OF FIGURES

FIGURE 1 – THE PROCESS OF TAILORING A XPS ................................................................................... 6 FIGURE 2 – THE RESEARCH METHOD UTILIZED IN THIS STUDY ........................................................ 9 FIGURE 3 – THE THEORETICAL FLOW ...................................................................................................... 18 FIGURE 4 – TRADITIONAL VS. LP OPERATING APPROACH ................................................................ 21 FIGURE 5 – THE DIFFERENT LEVELS WITHIN LP ................................................................................... 24 FIGURE 6 – REVISED LP LEVELS BASED ON THE BUNDLING OF PRACTICE ................................ 25 FIGURE 7 – BUNDLING OF PRACTICES – SHAH AND WARD (2003) .................................................. 29 FIGURE 8 – INTEGRATED FRAMEWORK OF PRACTICES – CUA ET AL. (2001) .............................. 31 FIGURE 9 – DYNAMIC PRIORITIZATION – ANGELIS AND JOHNSON (2010) .................................... 31 FIGURE 10 – SUGGESTED XPS FRAMEWORK ........................................................................................ 36 FIGURE 11 – THE EMPIRICAL FRAMEWORK ............................................................................................ 38 FIGURE 12 – THE INTERFACE BETWEEN THE TO AND THE TNO GRID........................................... 39 FIGURE 13 – THE FSO VALUE CHAIN ......................................................................................................... 40 FIGURE 14 – THE FLUCTUATING DEMANDS IN THE FSO MARKET ................................................... 43 FIGURE 15 – FSO ORGANIZATIONAL STRUCTURE ................................................................................ 45 FIGURE 16 – THE DIFFERENCE BETWEEN AN EFFICIENT ROUTE AND AN INEFFICIENT ......... 46 FIGURE 17 – THE INTERFACE BETWEEN THE DIFFERENT FSO FUNCTIONS ............................... 47 FIGURE 18 – THE MANAGEMENT OF FLUCTUATING DEMANDS........................................................ 51 FIGURE 19 – SERVICE DELIVERY ELEMENTS ......................................................................................... 54 FIGURE 20 – THE FSO WORK MODEL - GUIDED BY PRINCIPLES ...................................................... 58 FIGURE 21 – IMPROVEMENT PROGRAMME MODEL ............................................................................. 61 FIGURE 22 – JOB ROTATION ........................................................................................................................ 63 FIGURE 23 – COMMUNICATIONS INFRASTRUCTURE ........................................................................... 64

LIST OF TABLES

TABLE 1 – DATABASES IN THE LITERATURE SURVEY ......................................................................... 10 TABLE 2 – LIST OF RESPONDENTS, INITIAL INTERVIEW ROUND ..................................................... 12 TABLE 3 - LIST OF RESPONDENTS ............................................................................................................. 13 TABLE 4 – FOCUS GROUPS .......................................................................................................................... 14 TABLE 5 – PROJECT GOVERNANCE .......................................................................................................... 16 TABLE 6 – LP PRACTICES ............................................................................................................................. 29 TABLE 7 – PRACTICES HAVING A NEGATIVE/POSITIVE IMPACT ON COMMITMENT ................... 34 TABLE 8 – EVALUATION OF SUGGESTED XPS AGAINST CONTEXT REQUIREMENTS ................ 64


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CHAPTER 1

1 INTRODUCTION

The introducing chapter describe the background of the issues investigated in this study.

Further, it provides a short description of the company under research, and how its

experienced problems matches into to the general problem area. Finally a summary of the

research objectives and questions are presented.

This study set out to contribute in the area of how companies improve their operations

through a systematic adoption of operating practices, ultimately boosting competiveness.

It is important for firms to be competitive. To do so, firms have to continuously develop their

operational strategy ( Mackelprang and Nair, 2010; Fullerton and McWatters, 2001; Lay et

al., 2010). As a consequence of this and inspired by successful competitors, managers seek to

identify and develop different “one-best-way” to operate, commonly known as operating

practices – or principles (Netland, 2012; Voss, 2005). Systemizing such initiatives, a recent

trend amongst firms has been to group operating practices into company-specific Production

Systems (XPSs), providing operational guidance. The reason being that XPSs provide

continuity and direction to improvement initiatives, thus enabling companies to realize long-

term benefits and synergies (Towill, 2007; Netland, 2012).

Deciding which practices to adopt and how to design an appropriate XPS, existing research

suggests that each firm must tailor its approach to the requirements defined by the operating

context (Shah and Ward, 2003; Bartezzaghi, 1999; Pettersen, 2009). For instance, the

universality of some practices is limited, i.e. certain practices are not applicable, or do not

have constant effect in different company context (e.g. Pettersen, 2009). In addition, existing

research show that certain practices are interdependent and therefore should not be adopted in

isolation from each other (Cua et al., 2001; Shah and Ward, 2003; 2007). Consequently, how

well the tailoring is executed will determine the outcome and applicability of the XPS.

Further, the research on individual operating practices and their respective performance

effects is exhaustive (Pil and MacDuffie, 1996; Treville and Antonakis, 2006). In a more

limited scale, joint effect of multiple practices has been subject for research (Cua et al., 2001,


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Shah and Ward, 2003). Many of these practices have proved to provide firms with efficient

tools to manage today’s complex business environment (Gupta and Heragu, 1991; Hofer et

al., 2012; Demeter and Matyusz, 2011; Biggart and Gargeya, 2002). All of this has provided

managers with a wide array of practices to choose from when developing their operational

approach. However, there is a major shortcoming in the current discourse in terms of

understanding on how these operating practices should be combined and systemized, which is

necessary in order to secure their “promised” performance effects.

Summarizing, research indicates that certain operating practices have a positive effect on

operational performance. As a consequence, the application and adoption of appropriate

operating practices is an imperative in today’s increasingly competitive environment (Voss,

2005; Netland, 2012). However, some of the existing practices are not universally applicable.

As a result, the process of tailoring and prioritizing amongst practices is critical when

designing a XPS. Unfortunately, this area is lacking from the discourse, which constitutes a

major problem for operations managers that are in the process of developing a XPS.

Providing understanding in this area will enable practitioners to develop more accurate XPSs,

better suited for their company context.

1.1 Background

This study is part of a larger initiative at a Global Telecom Company (GTC). More precisely,

the study focused on their Swedish Field Service Organization (FSO). FSO operates within a

highly competitive environment; facing aggressive price levels together with increasingly

complex delivery requirements. As a consequence, FSO management have been forced to re-

evaluate their operational approach in order to boost competitiveness.

Inspired by the success of contemporary production systems, mostly from the manufacturing

industry, GTC and FSO management had decided to investigate the possibility to develop and

implement an own XPS. Supporting this process, a collaboration between the FSO and us was

established. In particular our task was related to investigating, specifying and designing the

content of an appropriate operating approach. That is, the implementation phase was planned

to succeed the development phase, and to be executed internally by FSO personnel.

After further discussions with the operational manager at the GTC and the CEO of the FSO,

and an initial literature review, the purpose and research questions started to evolve.


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1.2 Problem definition

Seeking sustainable competitiveness in operations, through enabling more large-scale and

long term effects from improvement initiatives, firms in different industries have started to

capture best practice initiatives into more systemized and holistic XPSs. Designing these

XPSs, organizations, FSO included, faces the challenge of tailoring a company-specific

operational approach – in order for the XPS to fit with their specific context. Figure 1

illustrates the process of tailoring and designing a XPS.

Figure 1 – The process of tailoring a XPS

Existing research is comprehensive with regards to what is included in individual operating

practices and what effects the singularly bring. However, there is a research gap with regards

to how these practices are compile into appropriate, context tailored XPSs. That is, existing

research is lacking with regards to the process of prioritizing amongst, and combining, single

operating practices into a system that facilitates an appropriate operating approach.

Consequently, the lack of understanding results in poor management choices, ultimately

risking the effectiveness of a XPS. In other words it is currently difficult for managers to

realize the potential benefits a well-designed XPS (Losoncin et al., 2011; Bhasin, 2012).

Summarizing, the purpose of this study is to add to the understanding for how to design an

appropriate XPS. Such insight will facilitate the process of developing efficient XPSs –

ultimately improving firms’ operational performance.


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1.3 Research objectives

To fulfil the purpose, the objective of this study is twofold. The first part is to add insight and

understanding for how to design a XPS that facilitates an appropriate operating

approach. This is done through reviewing previous research and conducting a case study. The

second part is to generate recommendations, supporting the XPS development at the case

company, the FSO.

By answering the research questions presented in section 1.4 develops conclusions and

recommendations for the given objectives.

1.4 Research questions

In realizing the objectives this study set out to answer the following overarching question:

How is a production system (XPS) designed that facilitates an improved operating approach,

given company-specific context?

To answer the overarching research question, the following three – case specific – sub

questions are investigated. The first question provides an understanding of the current

operational approach. The second question provides understanding for the demands, which a

new operating approach need to fulfil to be appropriate. The third question provides

implications for the design of a XPS given the demands.

Research Question 1 - How is operations currently managed at the FSO – (including main

controlling factors, perceived shortages, etc.)?

This question is imperative in order to understand how the practice elements should be chosen

and tailored in order to generate best possible outcome.

Research Question 2 – Given RQ1, which requirements need to be addressed in order for the

operating approach to be appropriate – (i.e. market, organizational and process

requirements)?

By answering RQ2 we obtained an understanding of what criteria the XPS need to fulfil in

order to provide the FSO with an appropriate operating approach.

Research Question 3 – How should an appropriate XPS at the studied FSO be designed, given

the implications from literature and RQ1- RQ2?

The answer to RQ3 defined an appropriate operating approach for the FSO.


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1.5 Delimitations

As described in section 1.4, this study addresses the question of how to design an appropriate,

company-specific production system (XPS). Following that focus, this project does not

address the question of how to implement such an operating approach. I.e. implementation

aspects, such as suitable project management, change management, financial requirements,

necessary timeframe, etc. are left out for further research. Neither is this study aimed at

finding an optimal operating approach, instead a suitable, appropriate or better operating

approach is pursued.

In addition, this study only investigates the service operation of one field service organization.

1.6 Abbreviations and acronyms

XPS – company-specific Production System

LP – Lean Production

ERP – Enterprise Resource Planning

TO – Telecom Operator

TNO – Telecom Network Owner

FSO – Field Service Organization

GTC – Global Telecom Company

DO – Delivery Organization

TQM – Total Quality Management

TPM – Total Preventive Maintenance

JIT – Just In Time

HRM – Human Resource Management

SLA – Service Level Agreement

Bundle – interrelated and internally consistent practices


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CHAPTER 2

2 METHOD

Following chapter describes the research method used to conduct this study. In particular,

the process of gathering both primary and secondary data is presented. In addition, this

chapter provides a high level flow chart describing the four main elements in the research

process – (1) Theory, (2) Empery, (3) Analysis, and (4) Reporting (see Figure 2).

Figure 2 – The research method utilized in this study


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2.1 Developing the theoretical framework

To investigate the research questions a literature study compiling relevant research on the

field of designing a XPS was conducted. In particular, this stage compromises (1) the XPS

concept and the terminology related to it, (2) existing frameworks regarding what generally is

acknowledged to be appropriate operating practices, and (3) how to prioritize among

operating practices when developing a XPS. The purpose of this research phase was to

establish a body of knowledge, in the form of a theoretical framework that, facilitated the

analysis of empirical data – ultimately strengthening the internal validity of the case study.

More specific, the gathering of secondary data was conducted by scanning four databases and

one scientific search engine (Table 1). We argue that these sources capture the majority of

acknowledged and relevant literature within the field of operational management and that they

therefore provide a sufficient base for the literature study. Specifically, each database has

been searched using an iterative semi-structured approach. Initial search phrases were

developed based on the three previously presented areas of interest.

DATABASE DESCRIPTION TYPE OF REFERENCES COVERAGE

Business Source

Elite

Full-text coverage for 1,100 business

periodicals (general magazines, trade

publications, top management journals)

Bibliographic database,

E-journal collection 1985-

Web of

Knowledge

Interdisciplinary database with access to

literature within sciences, social

sciences, arts, and humanities


Citation database 1966 -

Scopus

Abstract and citation database of peer-

reviewed literature (scientific, medical,

technical and social science


Citation database 1960-

Science Direct Scientific database covering journal

articles and books

E-journal collection,

E-book collection 1900-

Primo Search engine for KTHs online and print

collections Books, Journals, Reports N/A

Table 1 – Databases in the literature survey

2.2 Case study

The theoretical framework was in a second phase supplemented by a case study, conducted at

a firm in the process of developing a XPS. Serving as research object for this phase was a

Field Service Organisation (FSO), operating in the Nordic telecom market. Chapter 4

provides a comprehensive description of the research object and its operations.

In short, the reasoning behind the choice of research object was that (1) the FSO currently

faces the challenges described in section 1.1, (2) management at the FSO has decided to


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design and deploy a XPS and (3), the FSO has limited knowledge of what constitutes an

appropriate operating approach (e.g. knowledge of operating practices). In addition, the scale

of the operations (i.e. FSOs size encompass a wide variety of operational aspects and allows

for a comprehensive study given the timeframe) and the high level of data access further

support the choice. Conclusively, it is our opinion that the FSO served as a relevant and

feasible research object given the constraints of this study (e.g. time, financial, etc.).

The purpose of conducting a case study was to add empirical insight to the theoretical

framework initial developed from secondary data. More precisely, the aim was to investigate

operating context since it – as identified in section 3.3.2 – impacts the prioritization among

operating practices. Further, supporting the objective of providing the FSO with

recommendations, research suggests that case studies are ideally when developing manager

recommendations due to their close interaction with practitioners and the situations they faces

(Amabile et al., 2001, Leonard-Barton, 1990). In addition, case studies are regarded most

appropriate when previous knowledge on the research area is limited, as in this study - e.g.

investigating key variables and their relationships (Yin, 1994).

Specifically, case data was collected over a period of 4 months, through a combination of

interviews, focus group sessions and observations. Each of these data sources are described

further in section 2.2.1- 2.2.3.

Interviews 2.2.1

At an initial stage, a number of semi-structured interviews were conducted to provide

understanding of the general business context – e.g. product offerings, organisational

structure, customers, financials, etc. In particular, choosing a partly unstructured setup under

an interpretive paradigm, interviews were able to explore understandings, opinions, attitudes

and feelings among the respondents (Collins and Hussey, 2009). Further, respondents were

suggested by our main contact at the FSO, with the starting point of providing a

comprehensive context description – e.g. respondents represented different regions, all central

functions and all organisational levels. Also, in order to increase the response rate,

interviewees had the opportunity to freely choose a meeting time that suited them. Interviews

were on average 60 minutes long and conducted by an interview pair – one interviewer led the

questioning while the other documented the responses in writing. Table 2 presents a list of the

respondents and the main interview topic for respective


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TITLE INTERVIEW TOPICS

Head of FSO Strategic direction, organisational set-up, general market understanding

Head of Production Product offerings, current operating approach in service production

Contract owner Customer relations and product offerings.

Head of Finances Historical and current financial performance. Current cost structure.

Head of Dispatch Operations in support functions (e.g. dispatch and back-office).

Head of Sales Competition, customer relations, product offerings.

Customer Customer perspective on the FSOs operations.

Field Technician 1(region A) Work conditions, company culture, work tasks, operating routines.

Field Technician 2 (region A) As above.

Field Technician 3 (region B) As above.

Field Technician 4 (region B) As above.

Table 2 – List of respondents, initial interview round

Once an understanding of the general operating context was established, a larger number of

semi-structured interviews were held, directed at understanding problem specific context.

Specifically, current operating approach was studied to identify opportunities and challenges

at the FSO. On a high level, the purpose with these interviews was to identify requirements

for an appropriate production system at the FSO. In addition to interviews with management

this phase focused largely at collecting data from field technicians and employees at the

support functions (e.g. dispatch, back-office, etc.). The reasoning for this focus was that (1)

they constitute the majority of employees in the FSO and (2), they are the once mainly

realizing the principles of a future production system.

Interviews were planned and setup to capture a holistic understanding on aspects relating to

geographical-, functional- and work role differences. Further, in order to strengthen the

study’s validity, interview results were verified using multiple respondents from the same

role/function/region/etc. In total 42 respondents from 3 geographical regions were

interviewed, representing all internal functions as well as customers and competitors.

Questioning and documentation was setup as with the general interviews. On average

interviews were held for 60-90 minutes. In addition, 29 of the respondents were interviewed

during at least two occasions in order to complement and/or clarify previous answers. Finally,

in order to further strengthen the response rate, and to improve the validity, all interviewees

were ensured anonymity. Thus, respondents are not linked to specific data in the report. In

addition, addressing the issue with validity in data, Easterby-Smith et al. (2002) suggest that

using face-to-face interviews increases the possibility to collect “truthful” data. In Table 3 -

List of respondentsTable 3 below compromises the entire list of respondents.


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TYPE TITLE LOCATION PURPOSE

Interview FSO CEO Stockholm Understand organization, market

Interview Regional service manager Stockholm Understand Service operations

Interview Regional service manager Gothenburg Understand Service operations

Interview Back office manager 1 Gothenburg Understand administrative tasks

Interview Back office manager 2 Gothenburg Understand administrative tasks

Interview Dispatch Manager Gothenburg Understand dispatch set-up

Interview Dispatcher 1 Gothenburg Understand dispatchers task

Interview Dispatcher 2 Gothenburg Understand dispatchers task

Interview Key account manager Stockholm Understand market

Interview Head of operations FSO contract Stockholm Understand competition

Interview Head of operations GTC Stockholm Understand requirements

Interview Head of account Stockholm Understand Market

Interview FSO CFO Stockholm Understand Financial Requirements

Interview SPM support Gothenburg Understand system, measures

Interview ERP developer Gothenburg Understand handovers

Interview CEO support Gothenburg Understand complexity, market

Interview SPM Gothenburg Understand Contractual Set-up

Interview Head of SPM Gothenburg Understand specific contract

Interview Former service manager at a competitor Stockholm Understand Competition

Interview Customer, operations manager Farsta Understand customer requirements

Interview Head of logistics Stockholm Understand supply

Interview Regional service manager Halmstad Understand Service operations

Interview Field Technician 1 Halmstad Understand technicians work/process






Interview Field Technician 7 Gothenburg Understand technicians work/process

Interview Field Technician 8 Gothenburg Understand technicians work/process

Interview Field Technician 9 Stockholm Understand technicians work/process

Interview Field Technician 10 Stockholm Understand technicians work/process

Interview Warehouse manager Gothenburg Understand raw material handling

Interview Warehouse responsible Halmstad Understand raw material handling

Interview Project planner Halmstad Understand service setting

Interview Head of Service Stockholm Understand Service holistic

Interview Procurement manager Gothenburg Understand supply

interview Logistics manager Gothenburg Understand supply

Work shop Customer TO, head of procurement Halmstad Validate XPS design

Work shop Customer TNO, CEO Halmstad Validate XPS design

Work shop Customer TNO, procurement Halmstad Validate XPS design

Work shop Customer TO procurement Halmstad Validate XPS design

Table 3 - List of respondents


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Focus groups 2.2.2

Complementing the general, as well as specific interviews, focus groups were used to provide

further understanding for FSOs operations. More specifically, two groups were composite to,

at a first meeting discuss current operating approach, and at ta second meeting, discuss how

an appropriate production system should be designed. Participants, in both groups were mixed

to encompass different organisational levels, roles, functions and regions. Following Collis

and Hussey (2009) recommendation, an average of six participants attended the two sessions.

Further, even though discussions to a large extent were unstructured a number of directing

topics were introduced at the beginning of each session. That is, at the first session, focus was

directed at the challenges and opportunities currently perceived in the organisation. At the

second session, focus was directed at evaluating our theoretical framework in light of FSOs

context.

Each session was held for approximately two hours and the data was recorded in writing by

one of the researchers, while the other researcher directed the discussion. Finally, all records

were reviewed and verified by both researchers directly adjacent to the meetings.

Table 4 provides further details of the four sessions, participants and agenda.

GROUP DESCRIPTION TIME

Focus group 1 (FG1) Focus of challenges and opportunities in FSOs

operations (Session 1)

2 hours

Focus group 2 (FG2) Session 1 2 hours

Focus group 1 (FG1) Focus of requirements on an appropriate

production system (Ref. Session 1)

2 hours

Focus group 2 (FG2) Session 2 2 hours

Table 4 – Focus groups

Observations 2.2.3

Adding to interviews and focus group sessions, observations provided an important source of

information. Observations were facilitated through participating in FSOs operations during

the entire study (approx. 5 month). More specifically, observations were gathered from FSOs

head office, the administrative office, four regional service offices, 30 field visits and two

customer visits. Generally, the focus of the observations was directed at identifying work

procedures, corporate culture, work conditions, management actions, etc. A majority of the

observations were documented in writing and verified with the second researcher. In addition,

time studies were conducted during 19 out of the 30 field visits to provide quantitative data

describing work procedures.


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Internal documents 2.2.4

To further increase the understanding of the FSO operations and context, we obtained reports

from the internal Enterprise Resource Planning system (ERP). Specifically these contained

information about demand levels, and order flow. Additionally, they provided insight in prior

conditions, and supported the time studies discussed in the previous section. The reports were

copied and stored in a central database.

2.3 Cases study governance

In order to support the execution of the study and verify gathered data, a governance structure

together with the FSO was established and a workshop conducted. The setup and aim of these

research elements are described below.

Steer Group and Project Group governance 2.3.1

In order to (1) support the data gathering and analysis process and (2) facilitate a strong

involvement from the FSOs part, a governance structure consisting of two project groups was

established. More specifically, a Steering Group and Project Group, consisting of FSO

employees and us, meet for 90 minutes, every second week during the entire project.

Meetings were scheduled at the start-up of the study to ensure the attendance of all parties.

The agenda for the steering group meetings was to continuously update the FSO top

management on research progress as well as get feedback on the production system, as it

progressed. In particular, this set-up contributed with directional guidance in the XPS design

process. Further, this governance structure was part of facilitating top management

commitment and involvement, which, as identified in section 3.3.3 is a vital part of achieving

a successful outcome of an operating approach.

Complementing the steering group, a project group, led by us, was established to support the

practical execution of the case study. This forum provided project supporte with regards to

planning, data access, the identification of interview respondents, etc. Participants in these

meetings were, except from us, representatives from management, service production and

support functions. Table 5 provides a summary of the two governance forums


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GROUP PURPOSE/DESCRIPTION PARTICIPANTS SET-UP

Steering Group (SG)

Continuous update of research

progress to FSO management.

Provided guidance in the XPS design

process and facilitated commitment

from top management.

CEO

Service Manager

Production Manager

Contract Manager

Sales Manager

Researchers

Meet every two

weeks for approx.

90min.

Project Group (PG) Support the practical execution of the

case study

Contract Manager

Regional Service

Manager

Field Technician

Dispatcher

Researchers

Meet every two

weeks for approx.

90min.

Table 5 – Project governance

Workshop 2.3.2

At the final stage of the case study, we (together with FSO management) planned and

executed a one-day workshop. In total 22 participants, including top management from FSO,

Head of Operations at the GTC, CEO of the Telecom Network Owner organization (TNO),

Purchase Manager at the largest Telecom Operator (TO) and field technicians, attended. In

short, the purpose of this workshop was to verify the appropriateness of the suggested XPS.

Specifically, large focus was directed at the inputs from purchasing organisations and GTC

management. Data was recorded in writing.

2.4 Validity and reliability

As described in section 2.2, a case study entails benefits when seeking to investigate a

phenomenon in depth (Collins and Hussey, 2009, Gibbert et al., 2008). In particular, the

method is identified to be a suitable when part of the research objective is – as in this study -

to provide practical knowledge – i.e. recommendations to the FSO. However, as also pointed

out by Gibbert et al. (2008), a case study must be rigours in its designed to allow for

conclusions, and ultimately recommendations, to be relevant. Reviewing the rigorousness of

this study, internal-, construct- and external- validity as well its reliability is elaborated below.

Internal validity

As presented by Yin (1994), internal validity refers to the data analysis phase of a case study.

In particular, this measure assesses the causal relationship between variables and results

(Gibbert et al. 2008). Evaluating this study, we argue that internal validity has been enhanced

through (1) deriving conclusions based on a theoretical framework and (2), the use of theory

triangulation where possible, as recommended by Yin (1994).


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Construct validity

Relating to the data collection phase, Gibbert et al. (2008) argues: “construct validity refers to

the extent to which a study investigates what it claims to investigate” (Gibbert et al., 2008, p.

1466). Strengthening the construct validity of this study, we have sought to establish a clear

evidence chain and used data triangulation as a mean to verify data (Yin, 1994). That is,

research method and empirical data has been elaborated and a number of data sources have

been used. In particular, relating to triangulation, data from a large number of interviews,

focus groups, direct observations and a workshop has been compared to enhance validity.

Concluding we argue that the construct validity is high.

External validity

Finally relating to the validity, limitations in regards to external validity or “generalizability”

should be considered. That is, given that the study only investigated one research object, the

possibility to verify the generalizability of the empirical contribution has been low. However,

somewhat enhancing the external validity, it has been sought in this study to argue the

research rational and clearly describe the case study context – thus allowing the reader

evaluate the conclusions themselves. However, improving external validity, future research

should preferably adopt a cross case analysis, either through multiple case studies or a nested

approach (Gibbert et al., 2008).

Reliability

As described by Collins and Hussey (2009, p.64), “reliability refers to the absence of

differences in the results if the research were repeated”. More specifically, according to

Gibbert et al. (2008), the key issues relating to reliability, is level of transparency and ability

to replicate results. In this study, transparency has been enhanced by carefully accounting for

the research procedure. However, it should also be noted that measures to improve reliability,

such as actual name giving of respondents and disclosure of quantitative data has not been

possible due to its sensitive nature. Concluding the reliability should be considered to be

medium.


18

CHAPTER 3

3 THEORY

This chapter summarizes relevant literature and research supporting the process of designing

a company-specific production system (XPS) First, the XPS concept is generally described

and a clarification of terminology is provided to aviod conceptual confusion. Second, a

review of what currently constitutes “best operating practice” is presented. Third, a number

of implication for how to prioritize among different operating concepts is provided togheter

with a number of relevant work force aspects. Finally, theory is summerized in a framework

describing a XPS. Figure 3 illustrates content and logic of the following chapter.

Figure 3 – The theoretical flow

3.1 Facilitating long term improvements

Addressing the challenge of sustaining competitiveness, decision-makers struggles with the

task of boosting operational performance through various improvement initiatives.

Characterising such initiatives, Netland (2012) suggests that most historically have been to

adopt narrow, focused, projects or production concepts – e.g. quality circles, concurrent


19

engineering, set-up time reduction, etc. As a result, practitioners have found it difficult to

sustain long-term effects of any process improvements (Bateman, 2005; Jorgensen et al.,

2003, Towill, 2007). Trying to overcome these issues, inspired by the success of Toyota and

the Toyota Production System (TPS), many firms have developed more holistic improvement

programs – often packaged as company-specific production systems (XPSs).

Trial and error have led to the realisation that sustained success of improvement efforts demands a

higher degree of systematisation and adaptation of the best practices to a company’s own unique

characteristics and environment (Netland, 2012, p.1084)

Netland (2012) argue that a XPS compromise a list of strategically prioritised operating

principles, providing firms with long-term direction. In this context, a principle is described a

rule or belief, governing the firms operational behaviour. More precisely he argue that:

“principles are derived from a company’s operations strategy and give direction on how to

operate in accordance with the overall strategy” (Netland, 2012, p. 1087).

These programmes or production systems are important since research has shown that

companies, successful in designing and adopting an appropriate XPS outperform those that do

not (e.g. Netland, 2012, Voss, 2005). However, reviewing current literature there is a

confusion surrounding the terminology related to the XPS concept in general, and operating

principles in particular. This confusion is unfortunate since it inhibits the prioritization

amongst different operating principles, and consequently the design of a XPS. In order to

provide clarity, this matter is further elaborated in section 3.1.1.

Operating principles – a review of the terminology 3.1.1

As mentioned above, Netland (2012) defines a XPS as a list of operating principles. Further,

he suggests that a majority of the XPSs have a common foundation in a framework compiling

32 principles. More specific, these principles are theory-based and derived from four different

sources, Ohno (1988), Womack and Jones (1996), Liker (2004) and Shah and Ward (2003).

The conceptualizations and implications from each of these sources are elaborated below.

Similar to Netland (2012), Womack and Jones (1996), Ohno (1988) and Liker (2004) discuss

principles, which also can be considered as “rules and beliefs”. All of these principles carry

similar characteristics in the sense they provide an organization with operational guidance.

However, they amount of principles between the different author differs. For instance, the

principles derived from Womack and Jones (1996) research are general to their character,


20

aimed to facilitate an overarching “way of thinking”. Conversely, Liker’s (2004) principles

are broken down in sub-elements, being more concrete.

In contrast to above, Shah and Ward (2003) do not discuss principles but practices. These are

action-oriented, describing work methods guiding operational methods and routines. Adding

to the confusion Shah and Ward (2003) also introduce the concept of bundles of practices,

where they argue that individual, “inter-related and internally consistent practices” (p.130)

should be combined into bundles of management practices. Further, they explicitly

distinguish their practices from approaches such the one adopted by Womack and Jones

(1996).

Altogether, the operating principle discourse is complex and confusing. Netland (2012)

summarizes principles from different conceptualizations, all which are widely recognized and

adopted in XPSs. However, the principles are different to their character, e.g. Shah and

Ward’s (2003) being specific – action based, Womack and Jones’ (1996), as well as Ohno’s

(1998) are more general – providing direction and a way of thinking, and Liker (2004) being

somewhere in between. In other words, operating principles seems to exist on different levels

of abstraction; some operating elements provide direction and a way of thinking, while others

are practical and action oriented. Evaluating these operating principles, both categories seem

to be of equal importance and thus should be considered when designing a XPS.

3.2 The common foundation of XPSs

As discussed in previous section, XPS compromises different operating practices, and the

understanding of which practices to focus on is an imperative when designing a XPS.

Traditionally, operating principles come from different sources, however during the latest

years the discourse has been dominated by Japanese operations theory, e.g. SMED, TPM, Pull

scheduling, JIT, Kaizen, quick set-up, small lots, cellular manufacturing etc. (Voss, 2005,

Cagliano and Spina, 2000, Schonberger, 2007).

Many of those principles have a strong connection with the Lean Production (LP) concept

(e.g. Shah and Ward, 2003; Pettersen, 2009; Womack and Jones, 1996; and Liker, 2004).

With this in mind it is not surprising that existing literature also reveals a strong linkage

between current XPSs and LP (Lee and Jo, 2007). Netland (2012) also supports this

connection:

“Lean production principles either highly influence or actually form the basis of the majority of the

XPSs”. (Netland, 2012, p. 1091)


21

Further, Fullerton et al. (2013) provides an insight to why many companies recently have

chosen to pursue and implement LP operating principles:

“Lean manufacturing is often regarded as the most important strategy for manufacturing firms desiring

to achieve world-class performance”. (Fullerton et. al, 2013, p. 50)

Understanding how the LP concept is related with improved operating performance, a

comparison against a traditional operations paradigm provides insight. For example, Skinner

(1969) argues that firms’ possess different characteristic making some good at quality, some

at cost, some at speed, etc. Following such reasoning, a strategic prioritization has been

necessary when designing an operating approach. Exemplified, firms have traditionally had to

choose whether to compete as a specialist, delivering products at low cost, or as a broad

range competitor, offering higher flexibility but at a higher cost. Consequently, traditional

operating principles have required decision makers to make trade-offs, in terms of, deciding

which operational characteristic (cost, speed, flexibility, etc.) that is most important.

However, through the advent of LP the prioritizations discussed above have become less

important. This is since, as argued by Hayes and Pisano (1996), a “lean company” is better

equipped to compete with several of the mentioned characteristics simultaneously (see Figure

4), reducing the need for trade-offs in the operating approach. I.e. adopting a LP concept

enables a firm to offer flexibility at a low cost. Following such reasoning, a “lean company” is

positioned on a more favourable production frontier, than those firms optimizing according to

a traditional approach. Summarizing, Hayes and Pisano (1996) conclude:

“This “lean” competitor clearly provides a serious threat because it can offer both the product variety of

the “broad range” firm and the low costs of the specialist.” (Hayes and Pisano, 1996)

Figure 4 – Traditional vs. LP operating approach


22

More specific, well-executed LP practices are recognized with lower inventory levels,

reduced quality costs, greater customer responsiveness (e.g. Gupta and Heragu, 1991;

Fullerton and McWatters, 2001; Hofer et al., 2012; Demeter and Matyusz, 2011; Womack

and Jones, 1996). Together, this has resulted in an increased popularity of the LP concept, not

least reflected in the set-up of the current XPSs.

Conclusively, in order to stay competitive companies need to pursue better, more efficient,

ways to conduct their operations (Voss, 2005), i.e. through the adoption of specific operating

principles. A recent trend amongst firms has been to gather such operating principles into

XPSs (Netland, 2012). Many of the operating principles related to “world class performance”

are to be found within the LP concept (e.g. Fullerton et al., 2013; Lee and Jo, 2007). Thus, in

order to understand which best practices FSO need to pursue, the LP practices have to be

thoroughly understood. In the following section (3.2.1), some of the most common LP

conceptualizations are discussed.

Understanding the XPS foundation 3.2.1

Originating from the Japanese shop floors of, LP has evolved into a best practice paradigm for

operational management (Voss, 2005; Schonberger, 2007). Encompassing methods for

reduced lead times, lowered material costs and improved quality – LP provide firms with

guidance towards world class performance, as discussed above. However, even though

several attempts have been made in defining LP (e.g. Pettersen, 2007; Shah and Ward, 2007),

there is no coherent LP definition (e.g. Roy et al., 2006; Shah and Ward, 2003; Browning and

Heath, 2009).

Reviewing contributions of different researchers a number of descriptions of the LP concept

are identified. Categorizing these, Shah et al. (2008) argue that most LP definitions are

moving from a philosophical- to practical orientation. Several authors have made the same

distinction. I.e. between the practical approach – where LP is defined as set of management

practices, tools or techniques – and the philosophical approach – where LP instead is defined

as a set of overarching guiding principles and goals (Shah and Ward, 2007; Pettersen 2007;

Bhasin and Burcher, 2006).

Shah and Ward (2007) argue that these approaches not necessarily conflict each other. Instead

they suggest that LP compromises both a philosophical and a practical orientation. Others, for

example Bhasin and Burcher (2006) argue that LP primarily has philosophical orientation.

That is, singularly adopting a set of tools and techniques, without the underlying philosophy,


23

will not yield the significant and long-term performance outcomes associated with LP (Spear

and Bowen, 1999; Liker and Morgan, 2006; Browning and Heath, 2009; Losonci et al., 2011).

For instance, Bhasin and Burcher (2006) argue that many of the examples, where firms have

attempted a LP implementation but failed, are results of a too narrow and process oriented LP

approach.

Returning to the review of XPSs, it is evident that the XPS framework comprises both

philosophical and practical elements (section 3.1.1). That is, Netland (2012) shows that best

practice XPS are derived form a combination of practical tools and techniques, as well as

overarching philosophical beliefs and goals. Given this reasoning, Shah and Ward’s (2007)

definition of LP, where both the philosophical and the practical orientation are recognized is

more applicable in the XPS context, than those strictly advocating one of the two orientations.

Considering the discussion above, the LP concept can be divided into three different levels (

Figure 5 below); the highest level being the philosophy, compromising overarching goals and

providing the organization with a way of thinking. Further, the LP philosophy has a strong

connection to end-user value, and to the removal of waste from a product’s value stream

(Liker, 2004; Ohno, 1998; Womack et al., 1990). On a lower level, the philosophy is

supported by principles. For instance, Womack and Jones (1996) define five main principles

that constitute tenets of the LP philosophy: specify value, identify the value stream, focus on

flow, establish pull and seek perfection. In turn, at the lowest level, these principles are

realized by a number of tools and techniques, such as Kanban, single minute exchange of

dies, cross-functional workforce etc.


24

Figure 5 – The different levels within LP

However, looking further into the details of the LP levels, it is evident, as with the LP

definition, that no consensus has been reached on lower LP levels either. For instance,

different LP proponents defines different amount of principles, e.g. Liker (2004) define

fourteen, whereas Womack and Jones (1996) only define five. Similarly, there is confusion

with regards to the LP tools and techniques, not least considering the terminology.

Nevertheless, the number of principles and/or the philosophical definition does not constitute

the main difference between the LP advocates. For instance, Liker’s (2004) fourteen

principles can be viewed as a breakdown of the five principles outlined by Womack and Jones

(1996). Instead the main difference rests in the implications that the philosophical/practical

orientations bring to the practitioners – as previously discussed.

Liker (2004), Womack and Jones (1996) etc. argue that the LP philosophy is best realized

through the adoption of LP principles. Conversely, others suggest that the conceptualization

of LP into a bundle of practices is a better way of realizing the LP philosophy (e.g. Shah and

Ward, 2003, Cua et al., 2001, Shah and Ward, 2007). In this approach, LP is argued to rest on

a set of action oriented practices, used in the process of eliminating wastes from the value

chain. Further, Shah and Word (2003) argue that LP is realized through the adoption of a

specific set of LP practices, which in turn are argued to facilitate the overarching LP

philosophy:


25

“Although we do not directly address such philosophical positions, we recognize that they are important

and believe that they are reflected in the implementation of the lean practices that we do address.” –

(Shah and Ward, 2003, p. 130)

This bundle of practice approach is illustrated in Figure 6 below:

Figure 6 – Revised LP levels based on the bundling of practice

Similar to the framework illustrated in Figure 5, three levels can be derived from Shah and

Ward’s (2003) bundle of practice approach. However, in their framework the bundles

substitute the principle level, previously defined, as a better way of realizing the LP

philosophy.

Conclusively, in this section LP has been identified to cover three different levels, which all

need to be taken into consideration when designing and developing a XPS. In the following

section (3.3) the different levels of the LP concept are further elaborated and implications

from each are outlined.

3.3 Implications when tailoring a XPS

As discussed above in section 3.2, existing research reveals a strong linkage between an

appropriate XPSs and LP. Further, it was identified in section 3.2.1 that LP compromises

operating elements at different levels, moving from philosophically- to technically-oriented.

Providing insight to these XPS elements, section 3.3.1 addresses the implications from

defining an overarching goal, and section 3.3.2, discusses the process of adopting different

operating practices.


26

The importance of having a direction 3.3.1

As discussed in section 3.2.1, LP compromises different levels, the highest one guiding the

overarching operational direction. Argued by many, this directional guidance is important for

the operational approach to generate sustainable performance improvements (e.g. Bhasin and

Burcher, 2006; Liker, 2004; Shah and Ward, 2003; 2007; Losonci et al, 2011). This guidance

can be seen as a philosophy, aligning the beliefs and the ways members of an organization

think. Even though an exact definition is lacking, a common denominator in the LP discourse

is the focus on customer value, or more precisely the maximization of end-customer value

(e.g. Womack et al. 1990; Womack and Jones 1996).

One of the major issues, with regards to the philosophical level, is the lack of empirical

evidence (Shah and Ward, 2003). That is, there is no research investigating the relationship

between certain philosophies and performance. One possible explanation might be that it is

not the philosophy, as such, that generates measurable performance outcomes. However, the

importance of having an overarching philosophy becomes evident in light of one of the main

LP principles: the elimination of waste from a products value stream (e.g. Ohno, 1988,

Womack and Jones, 1996). That is, without an overarching philosophy, or direction,

understanding what is waste becomes arbitrary, and dependent on the individual perception of

each employee.

As discussed in section 3.2.1, the practical realization of the LP philosophy is debated.

Attempts have been made to break down the philosophy into more graspable sub-components,

principles (e.g. Ohno, 1988; Womack and Jones, 1996 and Liker 2004). As with the

philosophical level, the principles also constitute valuable guidance in terms of providing

insight in the process of prioritizing amongst operational practices.

Conclusively, an appropriate operating approach needs to provide an organization with long-

term directional guidance. Further, research contest that this guidance can be provided

through the formulation and adoption of an overarching philosophy, supported by a number of

principles. The methods for practically realizing these are further elaborated in section 3.3.2

below.

Implications when prioritizing amongst practices 3.3.2

As identified in section 3.3.1 above, philosophy and principles provides organisations with

directional guidance in their operations. However, realizing the goals of these overarching

XPS elements, more action-oriented elements, in the form of practices (previously discussed


27

in section 3.2.1), are also needed (e.g. Shah and Ward, 2007, Bhasin and Burcher, 2006,

Angelis and Johnson, 2010). This section describes implications on how to design a XPS

related to the adoption of practices.

As a consequence of the limited understanding for how to design a XPS, there are relatively

few existing guidelines on how to prioritize among operating practices. However, Womack

and Jones (1996) provide one action-oriented framework in their book Lean Thinking. Based

on practical experience, they develop a checklist, consisting of four phases and 21 steps,

addressing the process of adopting operating practices.

“We have learned from examining successful transformations across the world that a specific sequence

of steps and initiatives produces the best results” - (Womack and Jones, 1996, p. 247)

However, analysing their action plan, a number of concerns are identified in light of other

research. Below these issues are elaborated:

Firstly, the action steps suggested by Womack and Jones (1996) are based on conclusions

from a number of practical examples. As a result, the conclusions provided by Womack and

Jones (1996) has been derived from a relatively limited dataset, without analysing possible

implications from different operating contexts. That is, the suggested course of action, i.e.

choice of operating principles or techniques, might not be applicable for another company

facing similar issues, but in a different context. For instance, the relationship between their

approach and operational performance is not empirically validated. Secondly, the process of

prioritizing between principles is not addressed. That is, considerations regarding “which

practices to prioritize in a certain situation?”, “how different operating approaches

interrelate?”, etc. are not evaluated. Finally, the dynamics related to tailoring and adopting an

operating approach is not investigated. I.e. an operating approach developed at one time

might not be as suitable at a later stage. This is since, both internal and external contextual

requirements change over time – thus requiring adjustment of the operating approach.

Summarizing, three concerns, relating to prioritization among operating practices, requires

further investigation. In short these are (1) contextual dependence, (2) relationship between

practices and operational performance and (3), the dynamics of the operating approach.

Investigating these issues Shah and Ward (2003) provides empirical and practical insight to

the two first areas. As a framework for their research, they identify 22 operating practices and


28

group them into “four bundles of inter-related and internally consistent practices”. In Table 6,

below these practices are clarified.

PRACTISE EXPLANATION SOURCE

Competitive benchmarking Structured comparison between the own organization and competitors, after given perimeters, or key indicators.

Shah and Ward (2003)

Continuous improvement programs Is an ongoing improvement initiative, where employees are involved in problem solving related to: quality improvement, lead time reductions, process improvements etc.

Chan et al. (1990; pp. 51-56); Koufteros et al. (1998); White et al. (1999; pp. 5 ) and Conti et al. (2006, pp. 1016)

Process capability measurements Methods to measure and evaluate the processes - for example Value Stream Mapping (VSM)

Shah and Ward (2003) and McLachlin, (1997, pp. 285-288)

Quality management programs Methods to reduce quality defects in production Koufteros et al. (1998)

Total quality management Quality improvement towards perfection. In TQM not only external resources ought to be involved, but also suppliers. Compromises techniques such as "statistic process control".

Chan et al. (1990; pp. 51-56); White et al. (1999; pp. 5 ) and Conti et al. (2006, pp. 1016)

New process equipment/technologies

For example using small and simple machinery to enable product flow, instead of expensive more flexible machines

Chan et al. (1990; pp. 51-56)

Planning and scheduling strategies The scheduling strategies should allocate extra time for fixing unexpected issues. But also for meetings, maintenance etc. that not are related to the deliver. In addition the schedule should see to that deliveries always are executed on time, each day

McLachlin, (1997, pp. 285-288)

Predictive or preventive maintenance, and maintenance optimization

The maintenance of equipment and machinery is highly organized in a program, in order to reduce the unexpected downtime. This also means involving the operators in minor maintenance tasks in parallel with the production.

Koufteros et al. (1998); White et al. (1999; pp. 5 ) and Conti et al. (2006, pp. 1016)

Safety improvement programs Company programme where management indicates that there will not be layoffs due to increased productivity. Sometimes referred to as life long employment

McLachlin, (1997, pp. 285-288)

Cellular manufacturing The company employs a "product oriented layout" Koufteros et al. (1998)

Cycle time reductions Practices aimed at eliminate wastes from processing activates. E.g. Through time studies etc.

Focused factory production system, and bottleneck removal

This practice is concerned with the reduction of manufacturing complexity. E.g. Simplified org. Structure, reduced number of products, even product colours, minimized complexities of physical constraints - e.g. Bottleneck removal

Chan et al. (1990; pp. 51-56) and White et al. (1999; pp. 5)

JIT/continuous flow production Production processes is initiated by downstream demand. Chan et al. (1990; pp. 51-56)

Lot size reductions Practices that strives to reduce the batch size, i.e. Batch of one. McLachlin, (1997, pp. 285-288)

Pull system/kanban Prerequisite in JIT system, products are pulled through the production steps. Kanban is a signal system enabling pull systems

Chan et al. (1990; pp. 51-56); Koufteros et al. (1998); White et al. (1999; pp. 5 ) and Conti et al. (2006, pp 1016)

Quick changeover techniques This refers to practices concerned with the reduction of time between making one kind of item into making another kind.

Chan et al. (1990; pp. 51-56); Koufteros et al. (1998); White et al. (1999; pp. 5 ) and Conti et al. (2006, pp. 1016)

Reengineered production process For example the transferral from process oriented production to product oriented.

Chan et al. (1990; pp. 51-56) and White et al. (1999; pp. 5 )

Agile manufacturing strategies “…using market knowledge and a virtual corporation to exploit profitable opportunities in a volatile market place” (Naylor et al. 1999, pp. 108)

Naylor et al. (1999)


29

Cross-functional work force Workers are trained in different skills, in order to get a more holistic view over the organization. This decreases communications difficulties. A specific practice that enables this is job rotation.

Chan et al. (1990; pp. 51-56); Koufteros et al. (1998) and White et al. (1999; pp. 5)

Self-directed work teams Practices that allows workers to take more responsibility, e.g. That employees are given mandates to change processes within their own working area.

McLachlin, (1997, pp. 285-288)

Table 6 – LP practices

As mentioned these practices are then grouped into bundles: Total Quality Management

(TQM), Total Preventive Maintenance (TPM), Just-In-Time (JIT) and Human Resource

Management (HRM). A complete list of the practices and their respective bundle is presented

in figure Figure 7.

Figure 7 – Bundling of practices – Shah and Ward (2003)

Analysing the LP conceptualization above, Shah and Ward (2003) are able to show that

organisational context impacts prioritization between different practices. For example, plant

size, degree of unionisation and plant age, are all factors identified to impact the design of an

operating approach. Others also support this standpoint, for instance, Pettersen (2009),

Netland (2012) and Angelis and Johnson (2010) raises concerns regarding the possibility to

define a “universal” operating approach. In fact, Netland (2012) argues that tailoring a

production system to context might be the difference between success and failure.

“XPSs do have company-specific characteristics that might facilitate an XPS to succeed where off-the-

shelf lean improvement projects earlier have failed.” (Netland, 2012, pp. 1093)


30

Further, Shah and Wards’ (2003) analysis provides understanding for the relationship between

various operating approaches and operational performance. By applying concrete and

relatively well-defined practices, as opposed to guiding principles as Womack and Jones

(1996), Shah and Ward (2003) are able to empirically validate that their framework is

associated with improved operating performance. More precisely, while others have been able

to show performance improvements from applying individual practices (e.g. Pil and

MacDuffie, 1996; Treville and Antonakis, 2006), evidence from Shah and Ward (2003)

suggests that applying several practices simultaneously generate synergy effects resulting in

greater performance improvements. They conclude:

“Findings provide unambiguous evidence that the synergistic effects of all lean practices are associated

with better manufacturing performance… To not implement lean bundles is likely to put plants at a

performance disadvantage compared to plants that do implement” (Shah and Ward, 2003, p. 146)

Adding to the discussion above, Cua et al. (2001) provide further insight to the matter of

prioritizing among practices. By investigating the effects from simultaneously adopting basic

techniques of three management programs – JIT, TQM and TPM – (similar to the bundles

defined by Shah and Ward, 2003), they are able to show “that higher level of manufacturing

performance can be expected when the different common practices and basic techniques of

TQM, JIT and TPM are jointly implemented” (Cua et al., 2001, p.686). This is since different

components (TQM, JIT and TPM), contribute with different aspects to product, process and

equipment improvements (Cua et al., 2001). Also, the analysis of Cua et al. (2001) indicates

that the joint adoption of technical- and social- oriented LP elements leads to even better

performance. That is, similar to the discussion in section 3.2.1, they categorize operating

practices as either technical or social. Angelis and Johnson (2010) provides a description of

the two categories:

“The first view covers technical processes and routines, while the second view comprise of the social

element needed to make these processes and routines viable.” (Angelis and Johnson, 2010)

Exemplified, quick changeover techniques are technically oriented, while employee

involvement is a socio-technical element (Angelis and Johnson, 2010).

Thus, similar to Shah and Ward (2003), Cua et al. (2001) verifies the importance of adopting

s.c. Human- and Strategic- Oriented Common Practices (ref. to as HRM-bundle by Shah and

Ward, 2003) in parallel with the adoption of Basic Techniques – such as JIT, TQM and TPM.

The reasoning is that several of the problems related to adopting production systems are


31

related to HRM issues - e.g. cultural resistance to change, lack of training and education, lack

of coordination of the different departments, etc. Figure 8 describes their integrated

framework for an appropriate operating approach (Cua et al., 2001).

Figure 8 – Integrated framework of practices – Cua et al. (2001)

Dynamic practices, long-term direction

Finally, regarding the issue of how to prioritize among practices over time, Angelis and

Johnson (2010) provide a guiding proposition. Figure 9 describes the proposition further.

Figure 9 – Dynamic prioritization – Angelis and Johnson (2010)


32

Applying the categorisation of technical and socio-technical practices and adding an internal

and external dimension, Angelis and Johnson (2010) structures operating practices into four

groups. Specifically, evaluating the order of adoption it is suggested that:

“Individual practices are implemented in a hierarchical order moving from internal to external and from

technical to socio-technical.” (Angelis and Johnson, 2010, p. 11)

In other words, Angelis and Johnson (2010) suggest that internal, technical practices should

be implemented first. These are followed by internal, socio-technical practices, which in turn

are followed by external, technical practices and finally the adoption of external, socio-

technical practices. Following this reasoning the rational for this sequence is that:

“Social change is more difficult than the implementation of new processes.” (Angelis and Johnson,

2010, p. 11)

Further, regarding the process of designing an appropriate XPS, the reasoning above implies

the prioritization among practices is a dynamic process. More specifically, at different points

in time, different practices should be prioritized. Even though this mainly gives implications

related to the implementation process of a XPS, it also affects the initial design of a

production system. That is, the design of a XPS is a dynamic, evolving as requirements and

conditions changes. Similarly, Bertezzaghi (1999) suggests that appropriate production

systems should be strategically flexible, allowing practices to evolve over time in order to

cope with new demands.

Summarizing the theory related to the prioritization amongst operating practices, three

conclusions guiding the design of a XPS emerge. In short, (1) organisational context affects

the performance outcome of an operating approach and should thus be considered, (2) higher

level of operating performance can be expected when operating practices as jointly adopted,

(3) optimization of both social- and technically-oriented operating practices is necessary for

achieving maximum operating performance and (4), prioritization between different operating

practices differs over time, making the design of a XPS dynamic.

Work force aspects – generating commitment 3.3.3

Regarding the process of prioritizing amongst operating practices, elaborated above, it is

important to recognize that some of the operating practices might bring negative side effects

to a company. Especially, concerns have been raised with how LP impacts social elements

within an organization, such as employee motivation, stress and commitment (e.g. Mehri,


33

2006; Jones et al. 2012). This section provides further understanding of these concerns and

how to counteract these.

For instance, Mehri (2006) argue that the performance increases – discussed in section 3.2 –

often come at a cost payed by the employees. Further he states that performance measures are

the main focus in the LP discourse, why issues related to working conditions rarely are

surfaced:

“Books like The Machine That Changed the World just look at the numbers without any regard to the

human costs of lean work implementation. They talk about high productivity and extol the fast

assembly-line speeds. But on these lines, workers must work every second of every minute, without a

moment for a break.” (Mehri, 2006, p. 25)

In addition to this, Jones et al. (2012) concludes that LP programmes have a negative impact

on employee empowerment, which reduces the worker commitment. Even though a coherent

definition on commitment is lacking (Meyer and Hercovich, 2001), Allen and Meyer (1996)

provides some clarity:

Organizational commitment can be defined generally as a psychological link between the employee and

his or her organization that makes it less likely that the employee will voluntarily leave the organization.

pp. 252

Since research indicates that a committed workforce is a necessity in achieving the desired

objectives in an operating approach, it is vital to understand which practices that

drives/inhibits commitment in the workforce (Womack et al., 1990; Womack and Jones,

1996; Liker, 2004; Schonberger, 2007; Angelis et al., 2011;).

Some clarity to this issue is provided by (Treville and Antonakis, 2006). They argue that, for

example, employee motivation may be limited by excessive leanness. More specific, they

suggest that the impact on commitment has a contextual dependence, indicating that different

configurations of LP have different effects on for example motivation (Treville and

Antonakis, 2006). Angelis et al. (2011) are more specific; they show that some specific LP

practices have positive effects on commitment, while other activities have a negative effect.

Angelis et al. (2011) list seven practices that have a positive impact on employee commitment

along with seven that have a negative impact. In Table 7 below a list of these principles are

provided.


34

POSITIEVE IMPACT NEGATIVE IMPACT

Improvement participation Involuntary overtime

Task support Emphasis on speed over quality

Buffer use Ergonomic difficulties

Parts fit difficulties Defects traceable to specific workers

Cycle time Lack of tools

Job rotation Work pace

Display of individual output Disruptions of work flow

Table 7 – Practices having a negative/positive impact on commitment

A number of conclusions can be drawn from the list above. First, there is a positive

correlation between work discretion and employee commitment. This is indicated by the

positive correlation of “parts fit difficulties” and commitment. This may seem a bit counter

intuitive, but according to Angelis et al. (2011) “parts fit difficulties” allows workers to

exercise problem solving (increased discretion and autonomy), and also interrupts repetitive

routines (increased job scope) (pp. 577). Similarly, there is a positive correlation between

cycle time and commitment. This is since as cycle time increases, repetitiveness decreases.

Further, increased cycle times provide workers with increased possibility to plan and execute

their tasks (increased autonomy).

The positive correlation between autonomy/discretion and commitment may become

problematic in a LP environment. This is since, on the one hand LP is dependent on a high

degree of commitment (Womack et al., 1990), and at the same time, many LP practices are

intended to reduce the variability in processes (Womack and Jones, 1996; Ohno, 1988, Liker,

2004). One way of doing that is to reduce the number of upcoming errors through the

application of different practices. This makes the product quality more predictable, and the

production less dependent upon singular worker’s skill in problem solving. In other words,

the “parts fit difficulties” is built out of a LP system, reducing both work discretion and

autonomy, which may result in reduced commitment.

Having said that, Angelis et al. (2011) show that there is a strong positive correlation between

the participation in improvement programmes and commitment, which also is supported in

other research (e.g. Munene; 1995; Pearce, 1993). This fits well into the previous discussion,

since workers that are attending an improvement programme are able to exercise problem

solving and creativity (discretion). At the same time, this gives them a greater ownership to


35

impact their work situation (autonomy). Improvement programmes are common and

constitutes one important practice within the LP concept (e.g. Womack and Jones, 1996; Shah

and Ward, 2003; 2007; Pettersen, 2009).

Summarizing, there are LP practices that inhibit employee commitment, and there are

practices that enhance commitment. More specific, one implication with regards to this

discussion is that since many practices reduces discretion and autonomy on a process level,

there is a need to enable these at a higher level. For example through applying improvement

programmes.

3.4 A supporting framework – dimensions to consider when designing a XPS

In the section 3.1 it was concluded that a XPS provides firms with a systematic way of

capturing improvements. Further, it was concluded that there is a strong linkage between an

appropriate XPS and the elements associated with LP (Netland, 2012). This is since LP

provides firms with an efficient way of improving multiple operational dimensions

simultaneously (e.g. cost, flexibility, quality, etc.) (Hayes and Pisano, 1996).

Looking into the LP elements, it was found that there currently is a confusion surrounding the

terminology of different operating approaches. For instance, operating elements seem to exist

on different levels – philosophical, principle and practical, all of which are essential to define

and include when developing an appropriate XPS. More into detail, the LP concept rests on

the assumption that organizations should strive towards the maximization of end-user value.

This overarching vision or philosophy is on a lower level supported by a number of guiding

principles. In particular, waste reduction, involvement of every one and continuous

improvement was identified as key LP elements.

Further, it was concluded the overarching philosophy and guiding principles are facilitated

through the adoption of lower level practices or techniques. However, while the philosophy

and principles are generally applicable in any organisation, technical elements are less

generally applicable (Bartezzaghi, 1999). Instead prioritization among practices, in

accordance with operating context, is necessary (e.g. Netland, 2012; Shah and Ward, 2003;

Pettersen, 2009). More into detail, operating practices ought to be jointly adopted (Shah and

Ward, 2003), technical operating practices need to be supported by socially oriented practices

(Cua et al, 2001; Shah and Ward, 2007), and the operating approach need to be redesigned as

conditions changes (Angelis and Johnson, 2010, Barttezzagh, 1999).


36

Given the reasoning above, we propose a XPS framework consisting of three levels (see

Figure 10). Moving from abstract to practical, first, a XPS need to facilitate an overarching

vision. That is, an overarching philosophy brings important operational guidance to an

organisation. Second, the philosophy ought to be supported by a number of principles –

making the philosophy more foreseeable. Lastly, a number of practices, both socially- and

technically-oriented, are needed to realize the principles and ultimately the philosophy.

Defining these practices, we have chosen the LP conceptualization provided by Shah and

Ward (2003). The reasoning for this is that the individual practices and the bundle-concept, is

well researched, empirically validated and supported by others, for example, Cua et al.

(2001).

Describing the framework further, we argue that the three levels should be grouped into two

categories. In short, the philosophical and principle-level are universal in their applicability,

while the practice level needs to be tailored in accordance with organizational context.

Figure 10 – Suggested XPS framework


37

CHAPTER 4

4 RESULTS AND DISCUSSION

This chapter summarizes the empirical findings at FSO. Firstly the general business context is

described e.g. Organizational Structure, Product offerings, Market situation etc. Secondly,

data specific for tailoring, and developing the XPS is presented.

In answering the research questions, literature suggests that establishing understanding for the

firm’s operating context is a prerequisite when prioritizing among various operating

approaches (e.g. Shah and Ward, 2003; Pettersen, 2009 and Netland, 2012). That is, without

considering the implications from contextual factors there is an apparent risk that a chosen

operating approach will not yield the performance outcomes intended (Bartezzaghi, 1999).

Given the reasoning above, the empirical analysis is divided into three contextual streams or

areas of consideration (AC) – (1) Market, (2) Organisational and (3), Procedural. In short, the

Market-AC captures external factors impacting the operations – e.g. business model,

competition situation, customer relationship, supplier network, etc. The Organisational AC

defines factors such as communication, work force commitment, etc. Finally, internal context

relating to operating processes are analysed – e.g. delivery process steps, performance

measures etc. Following this, the empirical part of this study provides a broad understanding

for internal as well external contextual factors, surrounding FSO’s operations.

Furthermore, each of the three ACs are described and analysed from three dimensions to

answer the research questions – (1) Current approach, (2) Requirements for an appropriate

approach, and (3) Implications for designing a XPS.

That is, the first dimension answers the first research question - How is operations currently

managed at the FSO – (including main controlling factors, perceived shortages, etc.)?

These insights are then used to identify requirements a production system need to fulfil in

order for it to be an appropriate operating approach, answering the second research question:

Which requirements need to be addressed in order for the operating approach to be

appropriate?


38

Finally, the contextual data and requirements are evaluated in light of the theoretical

framework (section 3.4), in order to determine implications for how to appropriately tailor a

XPS. This corresponds with the third research question: How should an appropriate XPS at

the studied FSO be designed, given the implications from literature and RQ1- RQ2?

Figure 11 illustrates the empirical approach. In order to avoid confusion and repetition,

dimension one and two, i.e. RQ1 and RQ2, are investigated in a sequence for each of the ACs.

However, the third dimension is elaborated on separately in section 4.4.

Figure 11 – The empirical framework

4.1 Market Context

As argued above, not only internal but also external factors impact the company context. This

section summarizes the external factors (market context) surrounding the FSO operations.

More specific, the market is first generally described together with FSO’s offering. Secondly,

FSO’s position in the value chain is defined. Thirdly, the delivery conditions, defined by

FSO’s customers, and their implications are thoroughly elaborated. Finally, the order flow, or

the demand variation is discussed. All of these factors are then used in the formulation of a

specific set of market requirements that a future production system need to satisfy in order to

generate an appropriate operating approach.


39

Current state 4.1.1

The telecommunications industry was until 1980 entirely regulated by a governmental

agency, Televerket. However, during 1980 the market was opened for competition – a market

that FSO currently operates within.

The Field Service Organisation (FSO) is a Global Telecom Company’s (GTC) Swedish

delivery organization of field service, implementation and managed services. The FSO’s

customer base mainly consists of Telecom Operators (TO), and the Telecom Networks Owner

(TNO). Clarified, the TNO is a capacity infrastructure supplier of the TOs. This is since the

TNO owns big parts of the telecom network, i.e. the cupper and the fibre grids, as a heritage

from the former monopoly mentioned above. More precisely, the TOs connect end-users to a

main telecom network grid, where they rent capacity from the TNO (see Figure 12 below).

Figure 12 – The interface between the TO and the TNO grid

The telecom network is in continuous need of maintenance in order to prevent or correct

breakages. These activities are not performed internally by the TOs or TNO; instead they are

outsourced to service Delivery Organizations (DOs), e.g. the FSO. This service delivery is

more thoroughly discussed later in this chapter (section 4.3.1), but the value chain and the

order flow is outlined in the value chain discussion below.

Value chain and order flow

As stated above, the DOs conduct both preventive and corrective maintenance on the telecom

network. However, a vast majority of the maintenance services are of a corrective nature, why

this order flow is thoroughly discussed below.

In general the corrective maintenance is a response to a breakage or anomaly in the network.

The end users often experience these anomalies as a disturbance in the telephone line or in the

mobile/broadband connection. The anomalies occur as a result of different things, for


40

example: damages caused by natural wear (e.g. corrosion etc.), damages caused by external

tampering (e.g. equipment damaged during construction), faulty equipment or substandard

repairs. Regardless of the cause, the end user normally contacts the TO, where an initial error

investigation is conducted. Depending on the anomaly location, on the TO grid or the TNO

grid (see Figure 12), the TO creates and order which is sent to one of the DOs (if the anomaly

is located on the TO grid) or the TNO (if the anomaly is located on the TNO grid). However,

in general it is hard to determine the exact location of the error, why the order often goes

through the TNO. The TNO then defines a service order, which is sent to one of the DOs.

When an order has reached a DO, there are two possible routes. That is, (1) the order is either

executed by the DO internally, or (2) an additional handover takes place between the DO and

a sub-contractor (the order flow is illustrated in Figure 13 below).

Figure 13 – The FSO value chain

As stated above there are a number of handovers before the order reaches the DOs or the DO

sub-contractor. This creates a complexity with regards to the information flow, since the only

organizations that have a direct contact with the end-user are the TOs. More specific, the

services carried out by the DOs are based on information from end-users, which has been

obtained by the TOs.

In many instances, as argued by the FSO technicians, the information reaching FSO is

insufficient, creating a lot of issues and delays. For instance, in 10 out of the 30 field visits the

mission closure was delayed due to incorrect order specifications. More specific, in seven

cases the technicians conducted unnecessary measurements. In two cases, they had to turn


41

back to the warehouse in order to retrieve extra material. In one case the sent technician had

the incorrect competence, and had to leave the mission unresolved. These delays are

problematic from two perspectives. Firstly, delays negatively impact the FSO margins, since

almost all missions are fixed price (further discussed in the next subsection). Secondly, they

reduce end-user satisfaction, since their problems persist.

Interviews with technicians, the FSO management as well as TO and TNO personnel revealed

that, the substandard information is a result of mainly two things: (1) There are information

leakages in the handovers (when an order is re-entered in a downstream ERP). (2) The initial

information gathering by the TO is not as through as it ought to be. The latter issue is, at least

from a theoretical point-of-view, easier resolved than the first. The FSO KAM and contract

responsible argued that a formalized feedback link between FSO and the TOs is needed,

where information deficiencies are discussed. The value of a feedback link was also supported

in the first session with FG1 and FG2.

In pursue of competitive advantages one of the largest TOs and the TNO have recently

realized they, internally, have to increase the focus on end user value. As an example of this,

the above mentioned TO has made customer satisfaction to one of their main key performance

indicators. Reviewing the value chain, illustrated in Figure 13 above, the TO and the TNO

have to involve the DOs in order to facilitate this new focus. That is since, the TOs and the

TNOs only act as administrators in this value chain. Hence, a majority of the delivered end-

user value is determined by the services carried out by the DOs. However, TO and TNO

representatives argued that the DO involvement in the “end-user focus” so far has been

limited to a number of improvement forums, where potential improvement areas are

discussed. Further, they argue that the outcome of these forums have not been reaching up

expectations. Regardless, these initiatives suggest that the TOs and TNO are susceptible to the

feedback links discussed in the previous paragraph.

Service delivery conditions

In this subsection the procurement procedure and its implications on FSOs business is

discussed thoroughly.

The services products provided by the DOs are publicly procured, and the products are

carefully defined in terms of price levels and delivery terms. Clarifying, even though price

levels aren’t officially fixed, the purchasing process steers the DOs into an accepted price


42

range. Thus, providing the service within the accepted price range is a qualifying requirement,

not a source of differentiation (i.e. all of the DOs have similar price levels). Instead, given the

nature of the service provided, the main point of differentiation delivery precision. This is

since product specifications, in terms of content leaves little room for mistakes. More specific,

many of the products provided by the DOs are straightforward tasks with relatively low

complexity (e.g. splice a cable, replace equipment or visual inspections).

Since quality in terms of what is delivered generally does not represent a point of

differentiation between DOs, currently the most important performance measurement is

delivery precision. The emphasis on this measure is evident in light of current benchmarking

frameworks used by the TOs and TNOs. I.e. currently both regional service offices and

individual technicians, from different DOs, are measured against each other. Specifically, the

delivery of each order is evaluated against a predetermined deadline. These individual cases

are then aggregated into the delivery precision measure, where the number of orders

completed on time is put against the amount of orders not delivered on time. Further, the DOs

are obliged to maintain a certain delivery precision; a failure to do so results in penalty.

Looking further into the delivery precision measurement, data reveals that the current praxis

is to set a three-day deadline after the order is sent to a DO. This allows the DOs to plan their

service delivery and allocate specific orders to certain technicians. However, the time window

is not entirely fix, but dependent on the criticality of the anomaly. Exemplified, some

anomalies just result in disturbances – as a reduced coverage – while others eliminate the

coverage entirely. Between those particular cases the latter has a higher priority than the first

– resulting in a narrower time span.

Conclusively, the DOs are constrained by contractual clauses, which precisely define the

terms of delivery. This implies that the DOs are unable to define and develop service products

of their own. In other words, all of the DOs are delivering the exact same product, which is

beneficial for the procurer, but makes it hard for the DOs to distinguish themselves from the

competitors. Instead the planning and scheduling of the technicians, facilitating dependability,

as well as the speed in the service delivery are critical success factors in this industry.

Variation in Demand

Also related to the delivery, a data analysis of historical order volumes showed a large

variation in demand, making it hard for the DOs in general and FSO in particular to optimize


43

their capacity. The high variation is partly dependent on that the maintenance is procured as a

regional service commitment. In other words, a DO agrees to conduct all corrective and

preventive maintenance within a geographical area during a certain time period – in

accordance with the SLAs. At best, the DO gets a basic idea of the extent based on historical

data, however there are no guarantees with regards to volumes. For instance, seen over a year,

the order flow is irregular, following no particular pattern (in Figure 14 below the order

variation is displayed). As illustrated in the figure, a normal variation on company level is 10-

20% on a monthly basis. However, since the company compromises 12 regions (between

which capacity is hard to transfer), variations in the order flow on a regional level is larger.

Figure 14 – The fluctuating demands in the FSO market

Supporting the reasoning above, regional FSO managers testify that the order book can be

empty one week, only to exceed capacity the following week. Further, the regional managers

argue that because of the SLAs, discussed previously, FSO have almost no possibility to even

out the demand. Regardless of the volume the orders have to be executed within the given

timeframe, in order to avoid penalties. This poses a problem related to the staffing. Since the

DOs are compensated per completed order, FSO management argue that there is a trade-off

between manning for peak periods, carrying over capacity, thus avoid penalties or manning

for average volumes, risking poor deliver precision and to be penalized. Conclusively, another

success factor to balance the service capacity against the fluctuation order levels.

Market requirements for an appropriate operating approach 4.1.2

Summarizing the empirical findings related to the market context, three requirements defining

an appropriate operating approach emerge. These requirements are outline below:

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

Ord

er

volu

me

DESCRIPTION OF FSO ORDER VOLUME OVER 12 MONTHS


44

First, the purchasers of FSO’s services have put effort into becoming more end-user oriented.

However, given the current value chain (illustrated in Figure 13) they have a low possibility to

impact end-user value directly. This creates an opportunity for FSO. That is, becoming end-

user oriented, as opposed to purchaser oriented, FSO can create – a much needed – point of

differentiation from the competitors. More specific, DOs that are able to exhibit an end-user

orientation will positively distinguish themselves during the procurement procedures – at least

in a short-term perspective. Additionally, from a more long-term perspective, research

presented in section 3.3.1, suggest that managing operations with the overarching goal of

maximizing end-customer value is one important aspect in sustainable performance

improvements (e.g. Liker, 2004; Womack et al., 1990). Conclusively, one of the most

important market requirements on FSO’s operational approach will be the end-customer

orientation.

Second, the market requires the operating approach to facilitate high dependability in terms of

service delivery precision. This conclusion is based on that delivery precision currently

constitutes the most important performance measure. However, since these measurements are

so well communicated, the dependability is pursued by all of the DOs. Thus making it a

difficult point of differentiation. Regardless, improved dependability is a “must have”

objective, and an imperative for future success.

Finally, given the fluctuating demand flexibility in production capacity is also a key success

factor. More specific, product margins do not leave room for the cost of extra capacity.

However, the opposite, under capacity isn’t a viable option either due to the penalties

connected with inability to deliver.

4.2 Organizational Context

As discussed in the theoretical framework (section 3.3.2) the organizational context is

important when designing an operating approach (Bartezzaghi, 1999; Shah and Ward, 2003

and Netland, 2012). This section defines the FSO specific organizational context. More

specific four different areas are elaborated. First, a general description of the FSO functions is

provided. Second, due to the importance of having a committed workforce (Womack et al.,

1990; Schonberger, 2007 and Angelis et al., 2011), as discussed in section 3.3.3, the social

context is discussed. Third, the information flow between the different functions is

problematized. Finally, the volume variations and it is implications are discussed.


45

Current state 4.2.1

FSO is a relatively new actor in the telecom field service industry, and has experienced an

aggressive growth rate during the latest years. Consequently, there has been a large rotation at

top management level, and the organizational structure looks different from one week to

another. Currently FSO operates in 12 regions and employs roughly 350 people. In figure

Figure 15 below the organizational structure is outlined.

Figure 15 – FSO organizational structure

As illustrated in figure Figure 15 the organization is divided into four “functional areas”. As

denoted in section 1.5 the one in focus is the service function (marked in red). Below a

number of short functional descriptions are presented, in order to provide a general

organizational understanding.

Service and technicians

More specific, the service function is divided into two sub-functions, production and dispatch.

The production is spread out on 12 regional offices, with a main presence in the southern part

of Sweden. A regional office normally employs between 25-30 technicians, and is governed

by a regional manager. In addition, to cope with the fluctuating demands, each regional office


46

employs an additional 20-30 sub-contractors (further elaborated later). Each regional manager

is responsible for the preventive and corrective maintenance in carefully defined geographical

region.

Service and dispatch

The other branch in the service function is the dispatch. The dispatchers are responsible for

scheduling and allocation of orders to the technicians. The CEO argues that scheduling is a

core activity in FSO since it has a direct impact on the profit. This is since; a majority of the

service products are “fixed price products” which includes a fixed compensation for

travelling. Simplified, this means that the FSO gets payed the same amount of money for a 1-

hour travel as they do for a 15-minute travel. In addition, a logic route may allow a technician

to execute an extra order, see Figure 16 below.

Figure 16 – The difference between an efficient route and an inefficient

Further, the dispatch is a centralized function, employing roughly 30 “dispatchers”. Each

region has two allocated dispatchers, from which the technicians request certain type of

information.

Service and administration

Governed by the same supervisor as dispatch there is another function – the back office. The

back office is responsible for administrative tasks such as invoicing. More specific, when an

order has been completed it is noted in the internal ERP system by the technicians. The order

is then ready to be billed to the TO/TNO. In some cases the technicians also have to attach

certain documentation, which is a requirement from the procuring organization. In those cases

the back-office needs to control that the case is documented property, and if not send a

request for additional information to the relevant technician.


47

Service and contact support

Another essential function for the service production is the Service Product Management

(SPM). The SPMs are the contract owners, which also acts as contract experts. The SPMs are

the first ones to obtain new contract information from the TOs/TNO. Furthermore, they

frequently provide feedback the contracts to the TOs/TNO. The feedback is mainly related to

ambiguities or improvement areas. However, their main task is to communicate contract

information internally. The regional production managers frequently contact the SPMs for

support in contract questions. This is since there is a relatively complex proxy and handover

set-up surrounding the specific service products, which creates difficulties and confusion for

the technicians.

Below in Figure 17 the connections between the different functions are illustrated.

Figure 17 – The interface between the different FSO functions

Social considerations

As discussed in section 3.3.3, employee commitment in vital in the process of generating

sustainable performance improvements (e.g Schonberger, 2007; Angelis et al., 2011).

Regarding the commitment at FSO, there are a number of factors that have to be taken into

consideration when designing a XPS, which are outlined below.

Ever since the telecom monopoly was released, the telecom service industry has been a

turbulent workplace. That is, aggressive cost focus from the TOs and TNO has led to that new


48

DOs have replaced old, and there has been a lack of continuity. This is not least reflected by

the recent entry and the aggressive growth of the FSO. Having said that, several of the FSO

managers as well as technicians argue that the people working for the DOs have remained

constant over time. I.e. when a DO has been replaced, the new actor generally takes over the

employees (the technicians). According to the regional managers, this has resulted in that

many technicians take more pride in their line of work than the employing organization. For

instance, one of the service managers argued that: “technicians take pride in the network, not

in the employing organization”. Further, interviews with technicians suggests that this loyalty

disorientation may be a result of obliviousness at management level, since low effort has been

spent in trying to integrate new personnel in the company culture. In FSO specifically, many

technicians have worked for at least one of the other DOs. This became evident during

observations in the regional offices, equipment and commercial products (e.g. t-shirts, pens,

stickers etc.) with logotypes from competitors were found.

Further, the movement from one DO to another is seemingly uncomplicated for a technician,

both mentally and practically. Regarding the mental aspect of changing employer, one of the

technicians stated: “I do not care it is the FSO company logo on the to right corner of my

paycheck, or if it is company XX (competitor) logo”. Regarding the practical aspect, the

technicians are allowed to keep their old equipment, and in general, the new employer do not

try to change ingrained work methods or beliefs to better align the company-specific

operating approach. This has resulted in that there are as many different work methods as there

are technicians in the organization, which became apparent after the field visits. In other

words, there is a culture where technicians are free to control their own working environment,

in terms of operating practices and the organizational commitment is generally low.

The culture, discussed above, becomes particularly evident in the interface between the

dispatch and the service production. As mentioned above, the dispatchers are viewed as the

heart of the organization, and the quality of their work may determine whether a mission is

profitable or not. Many dispatchers testify an aversion, from the technicians, when it comes to

the planning and scheduling. This is since many technicians prefer to plan their own day and

often have an own opinion on which route, or sequence of missions that is more suitable. In

some cases the dispatchers argue that they have to take almost a mediating approach, trying to

appease the technicians by giving them a mission they do want on the premise that they also


49

accept one that they do not want. Altogether, this indicates generally low governance over

work routines and employee behaviour.

The FSO management states that the many individual practices and the low governance are

problematic, from a managerial point of view. More specific, due to lacking margins the FSO

in a strained situation. Different measures have been taken in order to increase productivity

and utilization in the organization. However, many of these initiatives have proven to be less

effectual than expected. This is since it currently is very hard to reach out with improvement

initiatives. The reason behind that is twofold: First, as discussed above, the 300 technicians

are to some extent working differently. This has made it hard to understand what the problem

areas are. Further, the different methods imply that the applicability of universal solution is

limited. I.e. a performance initiative may have positive impact in some cases, but a limited

effect in others. Second, and perhaps more important, the movement between the different

DOs have reduced the organizational commitment and created a culture where technicians

expect to be able to control their work environment to a very large extent. More specifically,

interviews with managers revealed that there is a general perception that technicians are

change resistant, and that they are unwilling to realize improvement initiatives. At the same

time, due to lack of control, it is not possible to force the technicians to adopt new operating

routines or procedures (further discussed in section 4.3.1).

Adding to the discussion above, interviews with technicians reviled a lack of management

consistency, and a generally low understanding for “their situation”. Further, many

technicians argue that they have raised own improvement ideas, without getting hearkened.

Consequently, many initiatives aimed to change the technicians’ environment are met by

aversion or resistance.

Communication channels and functional isolation

As already stated, the FSO service operation is divided into 12 regional offices. While – on

the contrary – the supporting functions are centralized in other locations (e.g. dispatch, back

office, SPMs etc.). This puts a lot of pressure on the communications infrastructure.

Especially interviews with SPM personnel, technicians as well as service managers have

revealed that the competence gathered in the SPM function has become a bottleneck.

Currently information regarding contractual set-ups and proxies is emailed to the technicians.

In many cases, that information contains guidelines that are vital to follow in order for the

services to be billable. Further, the contractual guidelines are not fixed, i.e. dynamic over


50

time, increasing the information flow. In other words, there is a constant flow of information

that needs to reach the technicians, in order for them to execute their tasks in an effective and

correct manner. However, interviews with both SPM personnel and technicians indicate that a

lot of this vital information never reaches the right address. As a result, unnecessary time and

effort is spent to correct invoices after they have already been billed to the TOs/TNO. Adding

to the problem, identified issues are rarely communicated back to the technicians, due to the

fact that there is no communication link between those correcting the mistakes, and those

committing them. As a consequence, same faults are committed over and over.

As mentioned previously, it has almost become a customary for every technician to find his or

her own “best operating way”. For instance, many technicians testify that they, on a daily

basis, spend a lot of time trying to do the right thing, e.g. searching among old emails from

the SPMs etc. Connected to this another problem arises, the few that have reached a correct

understanding, does not share it with the others. This implies that a lot of unnecessary, non-

value adding time is spent on trying to obtain information, and to find appropriate operating

procedures.

Furthermore, communication links between support functions and the service production are

not the only one missing. This problem characterizes all of FSOs internal and external

communications. One possible explanation to the internal issues is the functional and

geographical separation together with mistrust in management. As matter of fact, the

organization operates as in isolated silos, the dispatch and the service production being two

examples. Even though the silos are interdependent, perceived shortages in – for example –

dispatch from a technician’s point of view, are rarely communicated to the ones that are able

to change the situation. Regarding the external communication, i.e. communication to the

TOs/TNO and sub-contractors, there are deficiencies in routines and roles supporting such

communication.

Sub-contractors and the management of fluctuating demands

As discussed in the section 4.1.1 the telecom service market is characterized by fluctuating

demands. To some extent regional mangers argue that these variations can be managed by

overtime, which adds some flexibility. However, the regional managers as well and the rest of

the management team argue that the fluctuations are of such an extent that the overtime


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alternative isn’t sufficient. Instead the strategy is to utilize sub-contractors in order to cope

with the variation (see Figure 18 below).

Figure 18 – The management of fluctuating demands

However, after an extensive data analysis, it became evident that that this strategy has not

been entirely successful. More precisely, the analysis showed that the even though a decline

in volumes the sub-contractor utilization remained almost constant. Indicating a lag between

volume reduction and capacity reductions. Further an additional analysis showed that this is a

result of two, interdependent factors. First, management was not responding to the decline fast

enough. Second, the sub-contractors are not as flexible as anticipated. This depends on the

fact that a subcontractor generally is a small firm, normally with one to two employees and

FSO being the main, or only client. Consequently, if the sub-contractors were omitted from

the order flow when demand is low, many would declare bankruptcy and be unable to return

when the demand increases. The awareness of this may also have influenced the management

actions, hence the interdependence. More specific facing declining delivery precision during

high order flow, management chose to utilize sub-contractors although the demand is low.

This does mean that FSO carry over capacity, which as discussed in section 4.1.1 is

unsustainable, given the low margin. However, acknowledging the difficulty with this

strategy, the sub-contractor arrangement is necessary to some degree.

In addition to the issue discussed above, the sub-contractor set-up results in further

complexity. Especially related to additional operational discretion, communication

challenges, lower transparency and ultimately quality shortages.


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Organisational requirements for an appropriate operating approach 4.2.2

Summarizing the empirical findings related to the operational context, three requirements

defining an appropriate operating approach emerge. These requirements are outline below:

First, given the objective of improving FSOs operations, the future approach must facilitate a

new company culture. That is, following the implications from Cua et al. (2001) (section

3.3.2) social aspects in the form of HRM practices are a vital part of realizing many of the

technical practices relating to an appropriate operating approach. Case specific, in order to

identify and realize practical improvements, creating understanding and commitment amongst

FSO employees’ is a key success factor.

Second, the organizational context requires the new operating approach to facilitate an

integrative communications infrastructure, where perceived problems are surfaced and

resolved. In particular, functions cannot continue to operate as standalone silos. Instead they

must share experiences and cooperate in order to continuously improve the organizational

performance.

Third, given that external resources constitute a significant and necessary part of the FSO

operations, an appropriate operating approach must include the governing of subcontractor

operations.

4.3 Service delivery

So far the market and organizational context have been elaborated. Both which according to

theory will bring implications necessary to consider when designing a XPS. However, no

effort has been spent in order to define the current procedural context in the FSO, which will

carry implications of similar importance. That is why this section sets out to define the

processes carried out in service delivery. More specific the following areas are elaborated:

service process elements and performance tracking.

Current state 4.3.1

As mentioned in section 4.1.1, FSO delivers a number of service products related to

corrective and preventive maintenance. A first interesting finding related to the services

carried out by FSO is that the set up resembles traditional manufacturing. That is, the products

are highly standardized, especially in terms of content (e.g. in some cases there are flowcharts

describing the exact sequence of actions). Further, the order volumes, even though


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fluctuating, are relatively high. Several tens of thousands of orders are carried out each year,

indicating a high repeatability.

Service Process elements

Analysing FSOs operations further, the work processes related to service production (see

previous description of the value chain) provides a number of key insights. In particular,

breaking down the delivery of customer orders into sub-activities, three observations are

made. Below these are outlined and thoroughly discussed.

Firstly, even though the number of offered products (meaning no. of articles) are relatively

high (>100), the main activities, and execution sequence, involved in delivering a majority of

them are constant. In fact, a data analysis showed that approximately 75 precent of all FSO

deliveries comprises the same activities. More precisely, through field visits, supported by

interviews with technicians, the missions could be broken down into 14 main activities – as

illustrated in Figure 19. Further these activities could be grouped into four phases. In short,

every mission starts with Mission preparation phase, including order confirmation, mission

analysis, travel planning and material and equipment planning. This phase is followed by a

Travel and Site Preparation phase, compromising traveling to site, reporting and site

preparation – e.g. site access, preparation of equipment, etc. The second phase is succeeded

by the Error clearance phase. Aside from determining the nature of the issue and correcting

it, this phase involves reporting to the TO and end-user. The last phase is the Closure phase,

including maintenance of personal equipment, reporting and registering of exchange parts and

internal work report finalized.


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Figure 19 – Service delivery elements

The second observation comes from analysing the main activities individually. In particular,

after studying the 14 steps in Figure 19 above, it was confirmed that there is a large variety in

work routines. That is, there are no standard operating routines defining activities such as

reporting, material handling or even error clearance. For instance, field visits in different

region, reveal that “appropriate work approach” is determined on individual level. More

specific, Technician 1 has one approach (in terms of work sequence, choice of equipment,

model for planning, etc.) to manage mission A and Technician 2 has another. Reverting back

to discussion in section 4.2.1, this finding both reinforces that there is a high discretion in the

FSOs operations as well as ascertains some of its consequences. More specifically,

observations from field visits and interviews with management suggests that the current level

of work discretion makes it hard to, for example, ensure consistent production quality,

conduct reliable and valid performance measures and develop a universally applicable

improvement program.

Finally, analysing the breakdown of activities at a typical FSO mission, it becomes apparent

that a significant portion of the total mission time does not contribute to end-customer value.

More specifically, four activities can be identified as value adding or necessary non-value

adding, whilst the remaining 10 aren’t sought after by neither end-customers nor purchasers

(TOs and TNO). Thus, in LP terms, FSOs service production currently encompasses a


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significant portion of waste – largely depending on ineffective, non-optimized operating

procedures.

Tracking Performance

As described above, the FSOs production is relatively uniform in terms of which activities

that a service mission encompasses. However, despite the relatively high uniformity in

operations, allowing for standardisation and codification of work procedures, the general level

of transparency in FSOs operations is low.

More specifically, in order to track operational performance in the service production, FSO

has introduced two performance measures Productivity and Utilization. In short, the

performance of every field technician is measured, based on data from a time reporting

system. Relating to productivity, the time of each mission is registered and compared against

a predefined standard. Comparing the two values, the technician is then assigned

“productivity points”. At the end of every shift technicians should have reached a certain

number of points – a productivity target. As a complement to the productivity measure,

utilisation is tracked through comparing the total working time of each technician against the

time spent on billable missions.

The complete description of the measurement system and its behavioural effects resulted in is

relatively complex. However, a number of key issues have been identified, which are

elaborated bellow.

First, regional managers argue that the two adopted measurements do not provide sufficient

insight in how the operating procedures are carried out. That is, just measuring on the overall

time (with the exception of separating travel time) of each mission, improvement efforts are

hard to direct. For instance, not knowing the length of each 14 steps are and what they in turn

comprises, decision makers have no quantitative guidance on how to best improve end-

customer value and reduce waste (identified as the overarching goal in section 3.3.1).

Conclusively, the low granularity in current performance measurement inhibits the possibility

to implement systemized improvement programs.

Second, interviewing technicians, it was obvious that the current “point system” setup had

resulted in reduced motivation and commitment. In particular this was related to (1)

technicians felt that the requirement, in terms of “minimum points/day”, were not supported

by routines and operating approaches facilitating the requirement and (2), technicians


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perceived the implementation of performance measures as an expression of mistrust from

management. The later of these two issues, is strongly related to a limited understanding of

the underlying purpose, which in turn was related to limited information form management.

Finally, relating to the issues above, the current measurement system contributes to an

unfortunate reporting culture. Given the autonomous work setup (e.g. individual work tasks

on the field) employees started to optimize their behaviour according to the rules of the

measurement system. I.e. operations were carried out in a way that primarily sought to ensure

personal reward with the requirements rather than attaining company goals. More specific, the

end-customer value was undermined and in some situations even counteracted. Further,

relating to this, the setup of the performance measurement system resulted in “blame culture”,

which in turn, resulted in even lower level of transparency. That is, given the objective of

optimizing one’s performance (i.e. number of productivity points), technicians avoided

reporting issues or constraints that arose in operations due to their negative impact on

individual performance. Instead they found ways to circumvent issues or temporarily solve

them, which in turn increased work discretion and its associated issues (discussed in section

4.2.1). All in all, the ability to identify improvement areas was further reduced and work

discretion and, its associated issues, increased.

Process requirements for an appropriate operating approach 4.3.2

Summarizing the empirical findings related to the process context, two requirements defining

an appropriate operating approach emerge. These requirements are outline below:

First, as identified the service delivery processes are unstandardized. That is, currently there

are no standard operating procedures defined. In fact, every employee is able to define what is

an appropriate operating practice. This in turn, has resulted in problems with inconsistent

quality, difficulties in tracking performance and challenges to implement systemized

improvement programs. Resolving these issues, an appropriate operating approach must

facilitate standardized work methods and routines.

Second, adding to the previous requirement, a future operating approach must not only be

standardized but also optimized. That is, greater efforts are needed from all levels of the

organisation to determine efficient work methods and routines. In particular, tyring to

improve end-custom value, and reduce wastes that are not valued by customers, should be the

guideline for these improvement initiatives.


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Finally, a more granular measurement system is needed to, in a systemized and quantitative

manner, identify how to direct improvement initiatives. Further, in order to ensure sustained

commitment and motivation amongst employees, extensive information of the purpose and

involvement in the process of developing performance measurements, is necessary. Lastly,

measurement systems must be supported by a culture, which encourages the identification of

deviations rather than punishes it.

4.4 Proposed XPS at the FSO

In sections 4.1 – 4.3 the FSO specific context has been elaborated. Each of these sections

emerged into a number of operational requirements that the FSO-specific production system

(FPS) need to facilitate. In this section, the operational requirements are put against the

implications from theory, from which the suggested FPS design is derived.

The vision 4.4.1

As discussed in section 3.3.1 work practices should not be deployed in isolation from

underlying philosophies (Liker, 2004; Shah and Ward, 2003 and Losonci et al, 2011). Further,

research suggests that such a philosophy should facilitate an end-customer orientation, i.e. the

organization should strive to maximize the end-customer value (e.g. Womack et al., 1990;

Womack and Jones, 1996; Liker, 2004; Ohno, 1988). In the FSO case, having such a focus

has also proved to be an imperative (see discussion in section 4.1.2). This is due to the fact

that an increased end-user orientation would enable a point of differentiation from

competition. Further, such an orientation would provide FSO with a focus on how to direct

future performance improvement initiatives, without risking declined customer satisfaction.

Furthermore, research suggests that the philosophy become more graspable if it is broken

down in a number of principles, intended to provide operational guidance (Womack and

Jones, 1996; Liker, 2004). These are thoroughly elaborated in the next section.

The Principles 4.4.2

Choosing which principles to incorporate in a XPS, research emphases that they should be

directed at facilitating the overarching philosophy (Liker, 2004; Womack and Jones, 1996).

As argued in section 3.3.1, there is a lack of consensus on how many principles is needed.

However, given the FSO-specific operating context an approach consisting of three principles

was designed. These are, as outline in Figure 20, Involve everyone, Eliminate Waste and Seek

Perfection. The reasoning behind this choice is further elaborated below.


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Figure 20 – The FSO work model - guided by principles

Involvement of everyone

Womack et al. (1990) and Cua et al. (2001) argue that a key element in an operating approach

is that all organizational members are aligned and strives in the same direction. In order to

achieve this a production system need to facilitate the involvement of everyone. Given FSOs

organizational- (section 4.2.1) and market context (section 4.1.1), this principle is particularly

important. This is due to three main reasons:

First, it is currently difficult to conduct changes in the technicians’ operating routines. This is

dependent on a low possibility to control whether the changes really were adopted or not,

together with a change resistant culture. This makes the involvement and acceptance of

technicians a prerequisite in any change initiative related to their work routines.

Second, FSO’s operational performance is not only dependent upon the internal workforce,

but also on sub-contractors. Put differently, by only targeting the internal workforce

performance increases will be of a less extent. Hence, in order for the production system to

generate a desirable outcome, it will also have to include the sub-contractors.

Finally, as argued in section 4.1.2 the contractual set-ups and inefficient information flow

inhibits the end-customer value creation. This is not possible to change internally by the FSO,


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why the collaboration between FSO and TOs/TNO also should be addressed in the production

system.

Altogether, a lot of the value creation in the FSO will be dependent upon whether this

principle gets realized or not.

Waste reduction

The second proposed principle is waste reduction, which, by many, is argued to constitute a

foundation of an appropriate operating approach (e.g. Womack and Jones, 1996; Ohno, 1988;

Shah and Ward, 2007; Liker, 2004). In short, this principle directs the organization towards

the identification and removal of waste from a products value stream. This principle is

important to realize for FSO since a lot of the activities currently carried out within is of a

non-value adding character (i.e. waste), which reduces their efficiency in producing end-user

value.

Seek Perfection

The final principle, seek perfection, relates to one of the main XPS objectives. That is, as

argued by Netland (2012), to provide an organization with a systemized and long-term

approach to capture and realize improvements. In other words, the organization should

continuously strive towards becoming better – reaching a higher performance level.

Additionally, the proposed model illustrated in figure Figure 20 is useful in communicating

the overarching vision and provides some general guidance to the operating approach.

However, the value of defining such operational guidelines alone is limited. This is since it is

the practical approach – in the form of adopted practices – that will enable the realisation of

principles and philosophies and thus ultimately determine the outcome from a XPS (Shah and

Ward, 2003; Angelis and Johnson, 2010).

The Practices 4.4.3

As argued in section 3.3.2, there are a number of implications that need to be taken into

consideration when prioritizing amongst practices. Angelis and Johnson (2010) argue that a

company, with no previous LP experience as FSO, should start by introducing internal

technically oriented practices (e.g. quick change over techniques). However, as argued by Cua

et al. (2001) the possibility to implement any practice is dependent upon the employees’

willingness to change. In FSO this “willingness” or commitment is very low (see section 4.2.1


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and 4.3.1) and the technicians are not susceptible for any change initiatives. The low

commitment and change resistance reduces the applicability of Angelis and Johnson (2010)

proposition. Instead the initial choice of practices must facilitate employee involvement and

commitment in conjunction with technically oriented practices. Given this reasoning and in

order to realize the principles discussed in the previous section, we suggest that the first

practice included in the XPS should be a continuous improvement programme. This becomes

a natural choice in light of three things:

First, there is a positive correlation between the participation of improvement programmes

and commitment (Pearce, 1993; Angelis et al., 2011). This is necessary since commitment is a

prerequisite in securing the overarching philosophy (Shonberger, 2007; Womack et al., 1990;

Angelis et al., 2011), and that the current level of commitment is relatively low (see section

4.2.1).

Second, it involves FSOs employees in the process of determining other practices that are

appropriate to adopt. That is, the process of identifying problem areas and finding solutions to

address these, provides guidance for which practices that will increase performance and thus

should be adopted.

Third, a continuous improvement program provides a process for tailoring each practice to the

case specific context. That is, even though, for example, set-up time reduction might have

been identified as an appropriate practice, there is usually still a need to define a case specific

approach – i.e. how should a reduction in set-up time be facilitated.

Design of the Improvement Programme practice

As outlined in Table 6 (section 3.3.2) an improvement programme is defined as “an ongoing

improvement initiative, where employees are involved in problem solving related to: quality

improvement, lead-time reductions, process improvements etc” (Chan et al., 1990; Koufteros

et al., 1998; White et al., 1999 and Conti et al. 2006). Following the presented definition, we

propose that FSO should adopt an improvement program as the one outlined in Figure 21.


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Figure 21 – Improvement programme model

Describing the practical approach, we suggest that cross-functional and self-directing teams

are put together with the task of addressing identified “improvement areas” within current

operations. More specific, these teams should strive to improve operations in functional areas

such as service production, dispatch, back-office, etc.

The process of deciding which roles to involve in each improvement forum will depend on

the nature of respective focus area. For example, the improvement forum, focusing on service

production will not only require the attendance of FSO technicians but also the attendance of

sub-contractors. This is in order to capture the perspective of not only internal but also

external production resources – as discussed in section 4.4.2. Further, the reasoning for

having self-directing teams is twofold. In short, (1) team members are the once with direct

insight and understanding for a problem and (2), management resources might, if sought to

always be included in the improvement teams, become a bottleneck in the improvement

process. Further, we propose that these improvement teams meet on a regular basis (e.g. once

every week) and that they should structure work according to the three-step model outlined

below.


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First, issues, (e.g. wastes), within the focus area are identified through tools such as go see

activities, value stream mapping or benchmarking.

Second, potential improvements are analysed to determine impact on operational performance

in general and customer value in particular. Further, following the initial analysis, the

improvement team focus on defining a set of suitable actions to reduce or eliminate the issues.

One of the main outcomes of the improvement teams will be the reduction of unplanned

errors and eventually the facilitation of more standardized and efficient work methods. As

discussed in section 4.3.2 (Process requirements for an appropriate operating approach), these

outcomes are particularly desirable since FSO currently experience issues related to ensuring

consistent quality, tracking operating performance and adopting common operating

procedures. In addition, to ensure progress, solution owners as well as action timeframes are

defined for each improvement initiative.

Finally, in order to ensure that appropriate actions have been taken, the outcome of each

activity is measured. This step serves to (1) verify that undertaken actions has had the

anticipated impact and (2) enable the communication of improvements to the rest of the

organisation – further supporting the realisation of involvement of everyone.

Job Rotation

Further, in order to facilitate the involvement of everyone we propose that FSO adopts a job

rotation setup as the one outlined in Figure 22. We suggest that employees at a given interval

(e.g. 8-10 weeks) rotate in and out of an improvement team. Such setup would ensure that the

strain on an individual worker is manageable and that commitment is enhanced. In particular,

relating to the latter, we argue that the possibility to participate in these improvement

activities will preserve or improve employees’ job satisfaction and level of commitment as

operations become more standardized. That is, as identified in section 3.3.3, commitment and

satisfaction is related to job characteristics such as work discretion, autonomy, etc. Following

such reasoning, an increased level of standardization, resulting in reduced work discretion and

autonomy, might impact social work aspects negatively. Counterweighting such development

the participation in self-directing improvement forums provides a new source of motivation

and commitment. In short, we argue that technicians should perceive themselves as

“improvement experts” rather than, as now, “experts at circumventing daily problems”.

Consequently, a number of the work characteristics enforcing job commitment and


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satisfaction will in the future come from the improvement flow rather than the delivery flow

(Figure 22).

Figure 22 – Job rotation

Functional Isolation

Adding to above, as discussed in the organizational context (section 4.2.2), there is currently a

problem related to functional- and geographical isolation in the FSO. Specifically, problems

or issues are not communicated to the functions that have a possibility to resolve them.

Further, work routines and methods are currently defined by each individual rather than

centrally standardized. Addressing these issues we propose an approach where all the

improvement teams are governed by a centralized FPS function. The main objective of this

function is to – in a structured and systematic way – facilitate the communication and

collaboration between all of the improvement forums. That is, a problem might be identified

by one improvement forum but suitable to solve in another forum. E.g. production might

experience a problem with how the dispatch conducts their work. Resolving such an issue the

dispatch improvement team will most likely need to be involved. Further, the FPS forum

should facilitate the sharing a joint best practice (relating to work procedures, processes,

methods, etc.) – ultimately facilitating a higher level of standardisation in FSOs operations.

The governance structure and the suggested improvement forums are illustrated in figure

Figure 23 below.


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Figure 23 – Communications infrastructure

Summarizing

Conclusively we argue that the suggested FPS covers/fulfils a majority the requirements

identified from the FSO specific context (section 4.1.2, section 4.2.2 and section 4.3.2). Table

8 below indicates to what level the proposed XPS would fulfil the contextual requirements.

Table 8 – Evaluation of suggested XPS against context requirements

A green symbol indicates that the requirement has been fulfilled to a significant extent.

Yellow indicates that the requirement has been partly fulfilled. Red indicates that the initial

approach do not directly address the requirements.

Clarifying the requirements marked in yellow (improved dependability and standardized work

methods), we argue that these are partly addressed by the XPS through the adoption of

improvement teams and the communications infrastructure. That is, developing and sharing


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improved operating methods and routines will enable improved delivery precision and

increase the level of standardization. However, fulfilling these requirements will most likely

also require the adoption of other practices in the future – when employees’ receptiveness to

change has increased. Thus, the requirements have been marked partly fulfilled.

Regarding the requirements marked in red (flexibility in production capacity and more

granular measurement system), these are not directly addressed by the proposed XPS. The

reasoning for not pursuing practices addressing these requirements is the current change

resistance amongst FSO employees, making it difficult to adopt any technical practices aimed

at increasing control (e.g. extended performance measurements, centralized work scheduling,

etc.). This choice is also supported by the fact that many previous improvement initiatives

have failed to yield intended effect due to low employee commitment (section 4.2.1).

Conclusively, the proposed XPS is a steppingstone towards the future adoption of practices,

addressing the contextual requirements currently marked red. Further, the suggested

approach, exemplifies that the XPS design should be dynamic, as discussed in section 3.3.2.

That is, as contextual requirements and prerequisites change in FSOs operating context, the

choice of practices must be re-evaluated and adopted accordingly.

Altogether, we argue that the proposed XPS provides the FSO with a better, more appropriate

operating approach then the one currently adopted. Consequently, the initially stated

objectives of “adding insight and understanding for how to design a XPS that facilitates an

appropriate operating approach” and “generate, recommendations, supporting the XPS

development at the FSO” are fulfilled.


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CHAPTER 5

5 CONCLUSION

This chapter summarizes the work carried out in this study. It compromises four subsections:

first, section 5.1 provides answers to the research questions defined in the introduction.

Second, in section 5.3 the empirical contribution is outlined. Third, in section 5.2 the

theoretical contribution is outlined and elaborated. Last, the limitations and implications for

further research is discussed.

5.1 Research findings

Following section summarizes the analysis in chapter 4. Findings are structured according to

the research questions outlined in section 1.4.

The first research question was: How is operations currently managed at the FSO –

(including main controlling factors, perceived shortages, etc.)?

This question is thoroughly elaborated on in sections 4.1.1, 4.2.1 and 4.3.1 below a summary

of the findings follows, moving from external to internal factors. Further, the answer to this

question provides a foundation for RQ2, which outlines the demands a XPS need to fulfil in

order to constitute an appropriate operating approach.

First, the market that FSO operates within provides few possible points of differentiation. The

delivery terms are thoroughly defined, and there is a high fluctuation in the demands.

Consequently, one of the main challenges is to manage these fluctuations efficiently and

finding areas where the organization can excel in order to distinguish themselves from the

competition. Relating to the latter, optimization of operations facilitating end-customer value

is identified to be one way forward.

Second, a low level of commitment and receptiveness to change characterises the FSO

organization. Further, the different functions operate as in standalone silos, with a low degree

of cross-collaboration. In order to manage the fluctuations, mentioned above, the organization

has become dependent upon subcontractors. All together this has resulted in a vast number of


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different work methods, and a difficulty for management to direct and reach out with

improvements.

Third, despite the fact the FSO operates within a service industry, and that they offer a large

number of products, a majority of the service production process can be codified in 14

universal activities. However, the level of standardisation for each of these activities is low.

That is, operating procedures and methods are determined individually by every technician,

making it hard to manage and measure behaviours and ultimately operating efficiency.

Finally, due to the limited effort to optimize work processes, a remarkable portion of activities

carried out by the FSO are not contributing to end-customer value.

The second research question was: Given RQ1, which requirements need to be addressed in

order for the operating approach to be appropriate – (i.e. market, organizational and process

requirements)?

Given the findings outlined in research question one, we argue that an appropriate operating

approach needs to address the following requirements:

Market requirements (section 4.1.2)

The shift towards end-customer orientation, in order to differentiate from competitors.

Increased dependability in terms of service delivery precision, in order to cope with

existing performance measures.

Flexibility in terms of production capacity, in order to manage fluctuating demands.

Organizational requirements (section 4.2.2)

Improved understanding and commitment amongst the FSO employees, in order to

identify and realize practical improvements.

The enabling of an integrative communications infrastructure, where perceived

problems are surfaced and resolved

The governance of subcontractors’ operations, since they constitute a large proportion

of FSO’s service delivery.

Process requirements (section 4.3.2)

The standardization of work methods and routines.


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The continuous reduction of non-value adding activities from the service delivery

processes.

A more granular measurement system is needed to identify how to direct improvement

initiatives

The requirements outlined above constitute the starting point of the XPS design, which is

discussed in research question three below.

The third research question was: How should an appropriate XPS at the studied FSO be

designed, given the implications from literature and RQ1- RQ2?

In order to fulfil the requirements discussed in research question two, we propose that the

FSO specific production system should compromise three levels. On a highest level the

system should encompass end-customer orientation. This level is in turn supported by three

principles: involvement of everyone, waste reduction and to seek perfection. These are

relatively universal and long term in their character. The practical realization of these

principles, and ultimately the philosophy, should in turn be done through the adoption of

specific operating practices. At an initial stage, we posit that the practice level should be kept

relatively narrow. More specific, the FSO specific context and the requirements outlined in

RQ2, demands for an initial focus on socio-technical practices – improving receptiveness to

change. In particular a formal continuous improvement programme supported by job rotation

and self-directing work teams will constitute a suitable starting point. Additionally, the work

conducted in this programme will provide FSO with further guidance in the process of

prioritizing amongst other practices. Hence the suitable operation approach will not be static,

but evolve as the organization mature and the contextual requirements changes.

5.2 Conceptual contribution

Reviewing the current literature, much effort is spent on determining the relationship between

operating practices and organizational performance. However, realizing the benefits of such

practices, existing research provides little or no guidance on how to prioritize amongst the

many options, or how to incorporate them into a systemized and sustainable operating

approach. Since it is usually not possible to manage multiple change initiatives in parallel

with the daily operations this becomes a particularly urgent matter. This study creates

awareness and directs further research within this field. In addition to this general contribution

a number of, more specific, conceptual implications are presented.


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Firstly, as outlined is section 3.1.1, there is a current confusion surrounding the practice

concept (terminology). Different authors tend to mix practices with principles and principles

with philosophies. We posit that LP as well as a XPS needs to cover three levels, i.e. a

philosophical directional level, a principle level and a practice level. In addition, we suggest

that a XPS carefully should define how the different levels relate to each other. This is

important in order to avoid confusion and focus deterioration. Further, we argue that the two

top levels (philosophy and principles) are relatively universal and that they should remain

constant over time. The bottom level consisting of practices, should however be tailored to the

company specific context and allowed to evolve as the context changes. In addition this study

has provided a description of 22 operating practices based on an extensive literature review

(Table 6). The XPS framework is outlined in section 3.4

Secondly, the empirical contribution in this study supports that an appropriate operating

approach requires both technical- and socio-technical practices as suggested by Shah and

Ward (2007) and Cua et al. (2001). However, the suggested implementation order, i.e.

moving from internally technical to socio-technical practices (Angelis and Johnson, 2010;

Shah and Ward, 2003), is not always applicable. The reasoning behind this, exemplified in the

FSO case, is that socio-technical practices are a prerequisite for the adoption of technical

practices. Hence, we posit that not only the choice of practices is context dependent, but also

the sequence of adoption.

Finally, similar to above the case study showed that some of the practices classified as

internal (e.g. Angelis and Johnson, 2010; Chan et al., 1990), also have an external dimension.

For instance, the continuous improvement programme, elaborated in section 4.4.3, had to

cover external stakeholders – such as subcontractors and customers. Hence, we posit that the

classification of the continuous improvement programme as internal or external should be

context dependent.

5.3 Empirical contribution

Given the theoretical and the empirical findings we propose the following recommendations

to the FSO management.

Recommendation 1:

Given the research limitation, what is missing from this study is an implementation approach.

Thus we recommend a development of such an approach, and to simultaneously make


70

adjustments in the XPS if necessary (e.g. if it is partly inappropriate due to implementation

difficulties). In particular we argue that the implementation approach should facilitate the

education of the employees in the philosophical orientation as well as the supporting

principles (section 4.4.1 and 4.4.2). In parallel develop a work model as the one suggested in

section 4.4.3, i.e. the continuous improvement programme, together with the proposed

communications infrastructure. Further, it is our opinion that the urgency of this initiative is

emphasised and communicated.

Recommendation 2:

As discussed in section 3.3.2, the XPS design is not static. Consequently, requirements and

prerequisites from the operational context will evolve over time. Thus, so must the

operational practices in the XPS. FSO specific, as the change resistance decreases the

organization will be able to purse a higher rate of improvement. In order to enable a higher

pace it will be important to educate the personnel in all of the 22 practices defined by Shah

and Ward’s (2003) and included in our XPS framework (section 3.4). This is since these

practices will provide the employees with efficient tools and techniques to realize

improvement opportunities. Further, as identified in section 3.3.2 adopting practices from

each of the four bundles will yield high performance outcomes due to positive synergies.

Recommendation 3:

Research suggests that these kinds of changes in operational approaches are time consuming

(Angelis and Johnson, 2010). Thus if deciding to adopt the suggested XPS design,

perseverance and endurance will be a key factor. In light of the outcome from previously

improvement initiatives, it is important that this system does not become yet another failed

attempt, risking a further decline in commitment and change receptiveness. Hence the last

recommendation is to allocate adequate resources, and to accept an initial decline of

productivity.

5.4 Limitations and further research

Evaluating the research approach and contribution of this study, a number of limitations

should be acknowledged.

First, adopting a case study developed on data from a single research object entails limitations

with regards to external validity – the level of generalizability. That is, given the importance

of contextual factors when designing a XPS (section 3.3.2), presented contribution should


71

preferably be verified through a cross-case analysis. I.e. data from this case study should be

compared against data from firms operating in a different context. In particular, such research

would facilitate a more generalized understanding for how to design an appropriate XPS.

Having said that, we argue that the contribution of this study constitute a good starting point

for further research on how firms should design their production systems. In addition, we

argue that presented recommendations are relevant and directly applicable when designing

production systems within other GTC organisations, operating in the same context as FSO.

Second, research suggests that implementing XPSs are lengthy projects, often requiring a

period of upwards ten years before the full effects can be determined (Angelis and Johnson,

2010; Womack and Jones, 1996). With this in mind, this study is not able to evaluate the

outcomes of the suggested operating approach. That is, since this study does not (1) address

the issue on how to implement a XPS or (2) study the outcomes of an already implemented

XPS. In other words, any relationship between the proposed operating approach and

operational performance is not empirically validated. I.e. the proposed XPS framework and

the presented recommendations are derived from the implications from theory and the

analysis of current operating context. That is, perceived operational shortages have been

formulated into requirements, which in turn has served as a “specification” for the suggested

operating approach. Summarizing, future research should extended this scope and investigate

(1) possible implementation implications on how to design a XPS and (2) the relationship

between the suggested XPS design and operational performance.

Finally, it should be noted that many of the considered operating elements (e.g. principles and

practices) in this study, could be considered to exhibit the characteristics of a management

fashion (e.g. Abrahamson and Fairchild, 1999; Giroux, 2006). Following such reasoning, the

true relationship between operational performance and a XPS and its encompassing elements

is questioned. That is, LP as an operating paradigm towards “world-class performance” might

not prove to be best practice in the future. Investigating such criticism, an extended research

scope, where the performance outcomes of the recommendations from this study are

evaluated, would provide could once again serve to strengthen the validity of this study.


72

CHAPTER 6

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